LEASE AGREEMENT

1. Parties.  This Lease,  dated for reference  purposes only, March 11, 1996, is
made  by and  between  South  Bay/Fortran,  a  California  limited  partnership,
("Landlord"),   and  Elexsys  International,   Inc.,  a  California  corporation
("Tenant").

2.  Premises.  Landlord  hereby  leases to Tenant and Tenant  hereby leases from
Landlord,  upon the terms and conditions  hereinafter  set forth,  those certain
premises (the "Premises") presently known, as of the date of this Lease, as 4405
Fortran Court, situated in the City of San Jose, County of Santa Clara, State of
California,  described  as follows:  for  purposes of this Lease,  the  rentable
square  footage  area  of the  Building  shall  be  deemed  to be  approximately
sixty-six  thousand  three  hundred   sixty-eight   (66,368)  square  feet  (the
"Building"),  as shown cross-hatched on the site plan (the "Site Plan") attached
hereto as Exhibit "A". The Building is located on a larger parcel (the "Parcel")
containing  other buildings (the  "Buildings") as shown on the Site Plan,  which
Parcel is  described  in Exhibit  "B"  attached  hereto.  In the event  Landlord
subdivides the Parcel in the future into two (2) or more legal parcels, the term
"Parcel"  shall  thereafter  refer to the legal parcel on which the Premises are
located.  Except as provided in Exhibit "C",  Landlord  shall not be required to
make any alterations, additions or improvements to the Premises and the Premises
shall be leased  to  Tenant in an  "as-is"  condition;  provided,  however,  the
Premises will be delivered to Tenant in good condition and repair, including the
roof and structural integrity of the Building, and the Premises as they exist on
the date of  execution  of this  Lease  (exclusive  of any  Tenant  Improvements
constructed   pursuant  to  Exhibit  "C"),   will  be  in  compliance  with  all
governmental   codes,   ordinances  and  statutes,   including   Americans  With
Disabilities Act ("ADA").

3. Term.  The term of this  Lease  ("Lease  Term")  shall be for seven (7) year,
commencing  on July 1, 1996,  (the  "Commencement  Date") and ending on June 30,
2003, unless sooner terminated pursuant to any provision hereof. Notwithstanding
said  scheduled  Commencement  Date, if for any reason  Landlord  cannot deliver
possession of the Premises to Tenant on said date, Landlord shall not be subject
to any liability  therefor,  nor shall such failure  affect the validity of this
Lease or the obligations of Tenant hereunder,  but in such case Tenant shall not
be obligated to pay rent until  possession of the Premises is tendered to Tenant
and the  commencement  and  termination  dates of this Lease shall be revised to
conform  to the date of the  Landlord's  delivery  of  possession.  In the event
Landlord  shall permit Tenant to occupy the Premises  prior to the  Commencement
Date,  such  occupancy  shall be subject to all the  provisions  of this  Lease,
including the obligation to pay the Monthly Installment of rent, and Common Area
Charges.

4. Rent.

     A. Time of Payment.  Tenant  shall pay to Landlord as rent for the Premises
     the sum specified in paragraph 4.b below (the "Monthly  Installment")  each
     month in advance on the first day of each calendar month, without deduction
     or offset, prior notice or demand,  commencing on the Commencement Date and
     continuing  through the term of this Lease,  together with such  additional
     rents as are payable by Tenant to  Landlord  under the terms of this Lease.
     The Monthly  Installment  for any period during the Lease Term which period
     is less than one (1) full month  shall be a prorata  portion of the Monthly
     installment based upon a thirty (30) day month.

     B.  Monthly Installment

         (1) Initial Monthly  Installment.  The initial  Monthly  Installment of
         rent   payable   each  month   during  the  first  (1st)   through  the
         twenty-fourth  (24th)  month  of the  Lease  Term  shall  be the sum of
         Forty-six  Thousand Four hundred  Fifty-eight and no/100ths Dollars per
         month. ($46,458.00).

         (2)  Rent Adjustments.

               (a) Commencing  with the  twenty-fifth (25th)  month of the Lease
               Term,  the  Monthly  Installment  of rent shall be  increased  to
               Forty-nine  Thousand  Seven  Hundred  Seventy-six  and  no/100ths
               Dollars ($49,776.00);

               (b) Commencing with the  forty-ninth  (49th)  month of the  Lease
               Term,  the  Monthly  Installment  of rent shall be  increased  to
               Fifty-three    Thousand   Ninety-four   and   no/100ths   Dollars
               ($53,094.00); and,

               (c) Commencing with the  seventy-third  (73rd) month of the Lease
               Term,  the  Monthly  Installment  of rent shall be  increased  to
               Fifty-three  Thousand Four Hundred Thirteen and no/100ths Dollars
               ($56,413.00).

     C. Late Charge. Tenant acknowledges that late payment by Tenant to Landlord
     of rent and other sums due hereunder will cause Landlord to incur costs not
     contemplated  by this Lease,  the exact  amount of which will be  extremely
     difficult  to  ascertain.  Such  costs  include,  but are not  limited  to,
     processing and accounting charges, and late charges which may be imposed on
     Landlord  by the  terms  of any  mortgage  or deed of  trust  covering  the
     Premises. Accordingly, if any installment of rent or any other sum due from
     Tenant  shall not be received  by Landlord  within ten (10) days after such
     amount shall be due,  Tenant shall pay to Landlord,  as additional  rent, a
     late charge equal to six percent (6%) of such overdue  amount.  The parties
     hereby  agree  that  such  late  charge  represents  a fair and  reasonable
     estimate  of the costs  Landlord  will  incur by reason of late  payment by
     Tenant.  Acceptance  of such  late  charge  by  Landlord  shall in no event
     constitute  a waiver of  Tenant's  default  with  respect  to such  overdue
     amount,  nor prevent  Landlord from  exercising any of its other rights and
     remedies granted hereunder.

     D. Additional  Rent. All taxes,  insurance  premiums,  Common Area Charges,
     late charges, costs and expenses which Tenant is required to pay hereunder,
     together  with all interest and  penalties  that may accrue  thereon in the
     event of Tenant's failure to pay such amounts,  and all reasonable damages,
     costs and  attorneys'  fees and expenses which Landlord may incur by reason
     of any  default of Tenant or failure on  Tenant's  part to comply  with the
     terms of this Lease,  shall be deemed to be  additional  rent  ("Additional
     Rent") and shall be paid in additional to the Monthly  Installment of rent,
     and, in the event of nonpayment of the Monthly Installment of rent.

     E. Place of  Payment.  Rent shall be payable in lawful  money of the United
     States of America to Landlord at 511 Division Street,  Campbell,  CA, or to
     such other person(s) or at such other place(s) as Landlord may designate in
     writing.

     F. Advance Payment.  Concurrently with the execution of this Lease,  Tenant
     shall  pay  to  Landlord  the  sum  of  Forty-six   Thousand  four  Hundred
     Fifty-eight and no/100ths Dollars ($46,458.00) to be applied to the Monthly
     Installment of rent first accruing under this Lease.


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5. Security  Deposit.  Tenant shall  deposit the sum of Fifty-six  Thousand Four
Hundred Thirteen and no/100ths  Dollars  ($56,413.00)  (the "Security  Deposit")
upon  execution of this Lease,  to secure the faithful  performance by Tenant of
each term,  convenient and condition of this Lease.  If Tenant shall at any time
fail to may any  payment  or fail to keep  or  perform  any  term,  covenant  or
condition on its part to be made or performed or kept under this Lease, Landlord
may, but shall not be obligated to and without waiving or releasing  tenant from
any obligation  under this Lease,  use, apply or retain the whole or any part of
the Security  Deposit (A) to the extent of any sum due to Landlord;  (B) to make
any required payment on Tenant's behalf;  or (C) to compensate  Landlord for any
loss, damages,  attorneys' fees or expense sustained by Landlord due to Tenant's
default.  In such event, Tenant shall, within five (5) days of written demand by
Landlord,  remit to Landlord sufficient funds to restore the Security Deposit to
its original  sum. No interest  shall accrue on the Security  Deposit.  Landlord
shall not be required to keep the Security  Deposit  separate from its.  general
funds. Should Tenant comply with all the terms, covenants and conditions of this
Lease  and at the end of the  term of  this  Lease  leave  the  Premises  in the
condition  required by this Lease,  then said  Security  Deposit,  less any sums
owing to Landlord, shall be returned to Tenant within thirty (30) days after the
termination of this Lease and vacancy of the Premises by Tenant.

6. Use of  Premises.  Tenant  shall use the Premises  only in  conformance  with
applicable governmental laws, regulations,  rules and ordinances for the purpose
of general office,  research and  development,  light  manufacturing,  assembly,
warehousing and distribution of electronic  products,  and for no other purpose.
Tenant shall indemnify,  protect, defend, and hold Landlord harmless against any
loss,  expense,  damage,  attorney' fees or liability  arising out of failure of
Tenant to comply with any applicable  law.  Tenant shall not commit or suffer to
be committed,  any waster upon the Premises,  or any nuisance,  or other acts or
things  which  may  disturb  the  quiet  enjoyment  of any  other  tenant in the
buildings  adjacent  to the  Premises,  or allow  any sale by  auction  upon the
Premises,  or allow the Premises to be used for any unlawful  purpose,  or place
any loads upon the floor,  walls or ceiling  which  endanger the  structure,  or
place any  harmful  liquids in the  drainage  system of the  Building.  No waste
materials or refuse shall be dumped upon or permitted to remain upon any part of
the Premises outside of the Buildings  proper,  except in trash containers place
inside exterior enclosures designated for that purpose by Landlord. No material,
supplies,  equipment, finished products or semi-finished products, raw materials
or articles of any nature  shall be stored  upon or  permitted  to remain on any
portion of the Premises  outside the  Building  proper.  Tenant  shall  strictly
comply with the provisions of Paragraph 39 below.

7.  Taxes and Assessments

     A. Tenant's Property. Tenant shall pay before delinquency any and all taxes
     and  assessments,  license  fees and public  charges  levied,  assessed  or
     imposed  upon  or  against  Tenant's  fixtures,   equipment,   furnishings,
     furniture,  appliances  and  personal  property  installed or located on or
     within  the  Premises.   Tenant  shall  cause  said  fixtures,   equipment,
     furnishings, furniture, appliances and personal property to be assessed and
     billed  separately  from the real property of Landlord.  If any of Tenant's
     said personal  property  shall be assessed with  Landlord's  real property,
     Tenant shall pay Landlord the taxes  attributable to Tenant within ten (10)
     days after receipt of a written  statement from Landlord  setting forth the
     taxes applicable to Tenant's property.


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     B. Property Taxes. Tenant shall pay, as additional rent, its Pro Rata Share
     (as defined below) of all Property Taxes levied or assessed with respect to
     the  land   comprising  the  Parcel  with  respect  to  all  buildings  and
     improvements  located on the Parcel which  become due or accrue  during the
     term of this Lease. Tenant shall pay such Property Taxes to Landlord within
     twenty (20) days after receipt of billing.  Provided  that  Landlord  bills
     Tenant at least  thirty  (30) days  prior to the  delinquency  date of such
     Property  Taxes,  Tenant shall pay such Property Taxes to Landlord at least
     ten (10) days prior to the delinquency  date, and if Tenant fails to do so,
     Tenant shall reimburse Landlord, on demand, for all interest, late fees and
     penalties  that  the  taxing  authority  charges  Landlord.  In  the  event
     Landlord's  mortgagee  requires an impound for Property Taxes,  then on the
     first day of each month during the Lease Term, Tenant shall pay Landlord on
     twelfth  (1/12)  of its  annual  share  of such  Property  Taxes.  Tenant's
     liability  hereunder  shall be  prorated to reflect  the  Commencement  and
     termination dates of this Lease. Tenant's share of the Property Taxes shall
     be  determined by Landlord from the  respective  valuation  assigned in the
     Assessor's  worksheet  or  such  other  information  as may  be  reasonably
     available.  Landlord's  reasonable  determination  thereof,  in good faith,
     shall be  conclusive.  As used in this Lease,  the term  "Tenant's Pro Rata
     Share" shall mean a fraction,  expressed as a percentage,  the numerator of
     which is the number of square feet of floor space  contained  in all of the
     Buildings located on the Parcel. As of the Commencement Date,  Tenant's Pro
     Rata Share is twenty-two and forty-eight hundredths percent (22.48%).

     Notwithstanding  the  foregoing,  in the  event  of a  reassessment  of the
     Property  Taxes due to the voluntary sale of the Premises which sale occurs
     any time after the expiration of the second year of the Lease Term.  Tenant
     shall  not be  responsible  to pay its Pro Rata  Share of any  increase  in
     Property  Taxes  due to  such  sale to the  extent  such  increase  exceeds
     twenty-five  percent  (25%) of the Property Tax bill  assessed  immediately
     prior to the sale of the  Premises.  This cap  shall  not apply to any sale
     that  occurs  during  the first two (2) years of the Lease Term or any time
     after the  initial  Lease Term  expires,  and shall not apply for any other
     reassessment of the property due to construction of tenant  improvements or
     any other increase in value of the property.  Also, this cap shall no apply
     to any increase in real property taxes that result from a foreclosure sale,
     deed in lieu of foreclosure or other involuntary transfer of the Premises.

     For the purpose of this Lease,  "Property  Taxes"  means and  includes  all
     taxes,  assessments (including,  but not limited to, assessments for public
     improvements  or  benefits),  taxes based on  vehicles,  utilizing  parking
     areas,  taxes based or measured by the rent paid, payable or received under
     this Lease,  taxes on the value,  use, or  occupancy of the  Premises,  the
     Buildings  and/or  the  Parcel,  Environmental  Surcharges,  and all  other
     governmental  impositions and charges of every kind and nature  whatsoever,
     whether or not customary or within the  contemplation of the parties hereto
     and  regardless  of whether the same shall be  extraordinary  or  ordinary,
     general or special, unforeseen or foreseen, or similar or dissimilar to any
     of the  foregoing  which,  at any  time  during  the  Lease  Term  shall be
     applicable  to the Premises,  the Buildings  and/or the Parcel or assessed,
     levied or imposed upon to the Premises, the Buildings and/or the Parcel, or
     become  due and  payable  and a lien or charge  upon to the  Premises,  the
     Buildings and/or the Parcel, or any part thereof, under or by virtue of any
     present  or  future  laws,  statutes,  ordinances,   regulations  or  other
     requirements   of  any   governmental   authority   whatsoever.   The  term
     "Environmental  Surcharges"  shall mean and include  any and all  expenses,
     taxes,  charges or penalties  imposed by the Federal  Department of Energy,
     the Federal Environmental  Protection Agency, the Federal Clean Air Act, or
     any regulations promulgated thereunder or any other local, state or federal
     governmental  agency or entity now or  hereafter  vested  with the power to
     impose  taxes,  assessments,  or other  types of  surcharges  as a means of
     controlling or abating  environmental  pollution or the use of energy.  The
     term "Property  Taxes" shall not include any federal,  state,  or local net
     income, estate, or inheritance tax imposed on Landlord.

     C. Other Taxes. Tenant shall, as additional rent, pay or reimburse Landlord
     for any tax  based  upon,  allocable  to,  or  measured  by the area of the
     Premises or the  Buildings or the Parcel;  or by the rent paid,  payable or
     received under this Lease;  any tax upon or with respect to the possession,
     leasing, 

<PAGE>


     operation, management, maintenance, alteration, repair, use or occupancy of
     the  Premises  or any  portion  thereof;  any  privilege  tax,  excise tax,
     business and  occupation  tax,  gross  receipts tax, sales and /or use tax,
     water tax, sewer tax, employee tax,  occupational  license tax imposed upon
     Landlord  or  Tenant  with  respect  to the  Premises;  any tax  upon  this
     transaction   or  any  document  to  which  Tenant  is  party  creating  or
     transferring an interest or an estate in the Premises.

8.  Insurance

     A.  Indemnity.  Tenant  agrees to  indemnify,  protect and defend  Landlord
     against  and hold  Landlord  harmless  from any and all  claims,  causes of
     action, judgments,  obligations or liabilities, and all reasonable expenses
     incurred in  investigating  or  resisting  the same  (including  reasonable
     attorneys'  fees),  on  account  of,  or  arising  out of,  the  operation,
     maintenance,  use or occupancy  of the  Premises and all areas  appurtenant
     thereto.  This Lease is made on the  express  understanding  that  Landlord
     shall not be liable for,  or suffer loss by reason of,  injury to person or
     property,  from  whatever  cause  (except fro active  negligence or willful
     misconduct  of  Landlord),  which  in any way  may be  connected  with  the
     operation, use or occupancy of the Premises specifically including, without
     limitation,  any  liability for injury to the person or property of Tenant,
     its agents, officers, employees, licensees and invitees.

     B. Liability Insurance.  Tenant shall, at Tenant's expense, obtain and keep
     in force  during  the term of this Lease a policy of  comprehensive  public
     liability  insurance  insuring  Landlord  and  tenant  against  claims  and
     liabilities arising out of the operation, use, or occupancy of the Premises
     and all areas appurtenant thereto,  including parking areas. Such insurance
     shall  be  in  an   amount  of  not  less  than   Three   Million   Dollars
     ($3,000,000.00)  for  bodily  injury  or  death  as a  result  of  any  one
     occurrence and Five Hundred  Thousand Dollars  ($500,000.00)  for damage to
     property as a result of any one  occurrence.  The  insurance  shall be with
     companies  approved by  Landlord,  which  approval  Landlord  agrees not to
     withhold  unreasonably.  Tenant shall deliver to Landlord,  which  approval
     Landlord agrees not to thirty (30) days prior to the expiration  thereof, a
     certificate of insurance  evidencing  the existence of the policy  required
     hereunder  and such  certificate  shall  certify  that the policy (1) names
     Landlord  as an  additional  insured,  (2) shall not be canceled or altered
     without  thirty (30) days prior  written  notice to  Landlord,  (3) insures
     performance  of the  indemnity  set forth in Paragraph  8.A above,  (4) the
     coverage is primary and any  coverage by Landlord is in excess  thereto and
     (5) contains a cross-liability endorsement.  Landlord may maintain a policy
     or policies of comprehensive  general liability insurance insuring Landlord
     (and such others as are  designation  by Landlord),  against  liability for
     personal injury,  bodily injury,  death and damage to property occurring or
     resulting  from an  occurrence  in, on or about the  Premises or the Common
     Area,  with  such  limits of  coverage  as  Landlord  may from time to time
     determine are  reasonably  necessary for its  protection.  The cost of such
     liability  insurance  maintained by Landlord  shall be a Common Area Charge
     and  Tenant  shall  pay,  as  additional  rent,  its  share of such cost to
     Landlord as provided in Paragraph 12 below.


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     C. Property  Insurance.  Landlord shall obtain and keep in force during the
     term of the Lease a policy or policies of insurance covering loss or damage
     to the Premises and the  Buildings,  in the amount of the full  replacement
     value thereof,  providing  protection  against those perils included within
     the classification of "all risk" insurance,  plus a policy of rental income
     insurance in the amount of one hundred percent (100%) of twelve (12) months
     rent  (including,  without  limitation,  sums payable as Additional  Rent),
     plus, at Landlord's option, flood insurance and earthquake  insurance,  and
     any other  coverages  which may be required from time to time by Landlord's
     mortgagee.  Tenant  shall have no interest in nor any right to the proceeds
     of any insurance procured by Landlord on the Premises. Tenant shall, within
     twenty (20) days after receipt of billing pay to the Landlord as additional
     rent, the full cost of such insurance  procured and maintained by Landlord.
     Tenant  acknowledges that such insurance procured by Landlord shall contain
     a deductible  which reduces  Tenant's cost for such  insurance  and, in the
     event of loss or damage,  Tenant  shall be required to pay the Landlord the
     amount of such deductible.

     D. Tenants  Insurance.  Release of Landlord.  Tenant  acknowledges that the
     insurance  to be  maintained  by  Landlord  on  the  Premises  pursuant  to
     Subparagraph C above will not insure any of Tenant's property. Accordingly,
     Tenant, at Tenant's own expense, shall maintain in full force and effect on
     all  of  its  fixtures,  equipment,  leasehold  improvements  and  personal
     property in the Premises,  a policy of "All Risk" coverage insurance to the
     extent of at least ninety percent (90%) of their  insurable  value.  Tenant
     hereby releases Landlord, and its partners, officers, agents, employees and
     servants from any and all claims, demands,  losses, expenses or injuries to
     the Premises or to the furnishings, fixtures, equipment, inventory or other
     personal  property of Tenant in,  about,  or upon the  Premises,  which are
     caused by perils,  events or  happenings  where the same are covered by the
     insurance  required  by this Lease or which are the  subject  of  insurance
     carried by Tenant and in force at the time of such loss.

9.  Utilities.  Tenant  shall  pay for  all  water,  gas,  light,  heat,  power,
electricity,  telephone,  trash  pick-up,  sewer charges and all other  services
supplied to or consumed on the Premises,  and all taxes and surcharges  thereon.
In addition, the cost of any utility services supplied to the Common Area or not
separately  metered to the  Premises  shall be a Common  Area  Charge and Tenant
shall pay its share of such costs to Landlord as provided in Paragraph 12 below.

10.  Repairs and Maintenance

     A.  Landlord's  Repairs.  Subject to provisions  of Paragraph 16,  Landlord
     shall keep and maintain the exterior roof, structural elements and exterior
     walls of the  Building  in good  order  and  repair.  Landlord  shall  not,
     however, be required to maintain, repair or replace the interior surface of
     exterior  walls,  nor shall  Landlord be required  to  maintain,  repair or
     replace windows,  doors,  skylights or plate glass.  Landlord shall have no
     obligation to make repairs under this Subparagraph  until a reasonable time
     after  receipt of written  notice from Tenant of the need for such repairs.
     Tenant shall reimburse  Landlord,  as additional rent,  within fifteen (15)
     days after receipt of billing, for the cost of such repairs and maintenance
     which are the obligation of the Landlord hereunder,  provided however, that
     Tenant  shall  not be  required  to  reimburse  Landlord  for  the  cost of
     maintenance  and repairs of the structural  elements of the Building unless
     such maintenance or repair is required because of the negligence or willful
     misconduct of Tenant or its employees,  agents or invitees. As used herein,
     the term "structural elements of the building" shall mean and be limited to
     the foundation,  footings, floor slab (but not flooring), structural walls,
     and roof  structure  ( but not roofing or roof  membrane).  Notwithstanding
     anything in the foregoing to the contrary,  Tenant shall not be responsible
     to reimburse Landlord for the cost of any roof replacement during the first
     two (2)  years  of the  Lease  Term;  however,  if at any  time  after  the
     expiration  of the second  (2nd)  year of the Lease  Term,  throughout  the
     balance  of the  term of this  Lease  or any  extension  thereof,  the roof
     membrane requires replacement,  Landlord shall perform such replacement and
     Tenant shall pay to Landlord, as Additional Rent, a fraction of the cost of
     such replacement,  which fraction shall have as its numerator the number of
     calendar  months  remaining  in

<PAGE>

     the Lease  Term at the time of if such  replacement  and shall  have as its
     denominator 240 months.  If Tenant  exercises any option to extend the term
     of this Lease,  then at the  commencement  of any such option term,  Tenant
     shall  pay  to  Landlord  an  additional  fraction  of  the  cost  of  such
     replacement,  which  fraction shall have as its  denominator  the number of
     months in the option term in  question,  and shall have as its  denominator
     240 months.  All payments  required of Tenant under this  Subparagraph 10.A
     shall be made within thirty (30) days after receipt of billing.

     B. Tenant's repairs. Except as expressing provided in Subparagraph A above,
     Tenant shall,  at its sole cost,  keep and maintain the entire Premises and
     every part  thereof,  including  without  limitation,  the windows,  window
     frames, plate glass,  glazing,  skylights,  truck doors, doors and all door
     hardware, the walls and partitions, and the electrical, plumbing, lighting,
     heating,  ventilating  and air  conditioning  systems and equipment in good
     order,  condition and repair. The term "repair" shall include replacements,
     restorations  and/or renewals when necessary as well as painting.  Tenant's
     obligation shall extend to all  alterations,  additions and improvements to
     the  Premises,  and all  fixtures  and  appurtenances  therein and thereto.
     Tenant shall,  at all times during the Lease Term, have in effect a service
     contract  for  the   maintenance  of  the  heating,   ventilating  and  air
     conditioning  ("HVAC")  equipment  with  an  HVAC  repair  and  maintenance
     contractor  approved by Landlord.  The HVAC service  contract shall provide
     for periodic  inspection and servicing at least once every three (3) months
     during the term hereof,  and Tenant shall  provide  Landlord with a copy of
     such contract and all periodic service reports.

     Should Tenant fail to make repairs required of Tenant  hereunder  forthwith
     upon five (5) days notice from Landlord or should Tenant fail thereafter to
     diligently  complete  the  repairs,  Landlord,  in  addition  to all  other
     remedies,  may make the same,  and in that event,  Tenant  shall  reimburse
     Landlord as  additional  rent for the cost of such  maintenance  or repairs
     within five (5) days of written demand by Landlord.

     Landlord shall have no maintenance or repair  obligations  whatsoever  with
     respect to the Premises  except as expressing  provided in Paragraphs  10.A
     and 11. Tenant hereby  expressly  waives the  provisions of Subsection 1 of
     Section 1932 and Sections 1941 and 1942 of the Civil Code of California and
     all  rights to make  repairs at the  expense of  Landlord  as  provided  in
     Section 1942 of said Civil Code.  There shall be no allowance to Tenant for
     diminution  of rental  value,  and no  liability on the part of Landlord by
     reason of  inconvenience,  annoyance or injury to business arising from the
     making of or the failure to make,  any repairs,  alterations,  decorations,
     additions  or  improvements  in or to any  portion of the  Premises  or the
     Building  or Common  Area (or any of the area used in  connection  with the
     operation thereof,  or in or to any fixtures,  appurtenances or equipment),
     or by reason of the negligence of tenant or any other tenant or occupant of
     the Parcel. In no event shall Landlord be responsible for any consequential
     damages  arising  or  alleged  to have  arisen  from  any of the  foregoing
     matters.  Tenant hereby agrees that Landlord shall not be liable for injury
     to Tenant's  business or any loss of income  therefrom or for damage to the
     goods, wares,  merchandise or other property of Tenant, Tenant's employees,
     invitees,  customers,  or any other  person in or about the  Premises,  the
     Building,  or the Common Area,  nor shall  Landlord be liable for injury to
     the person of Tenant,  Tenant's  employees,  agents or contractors  whether
     such  damage  or  injury  is  caused  by  or  results  from  fire,   steam,
     electricity, gas, water or rain, or from breakage leakage,,  obstruction or
     other  defects  of wires,  sprinklers,  wires,  appliances,  plumbing,  air
     conditioning  or lighting  fixtures,  or from any other cause,  whether the
     said damage or injury results from any other cause, whether the said damage
     or injury results from  conditions  arising upon the Premises or upon other
     portions of the Building, or from other sources or places and regardless of
     whether  the cause of such damage or injury or the means of  repairing  the
     same is  inaccessible  to  Tenant.  Landlord  shall not be  liable  for any
     damages arising from any act of neglect of any other tenant, if any, of the
     Building or the Parcel.

11.  Common  Area.  Subject to the terms and  conditions  of this Lease and such
rules and  regulations as Landlord may from time to time  prescribe,  Tenant and
Tenant's employees, invitees and customers shall, in common with other occupants
of the Parcel,  and their  respective  employees,  invitees and  customers,  and


<PAGE>

others  entitled  to the use  thereof,  have the  nonexclusive  right to use the
access roads,  parking areas and facilities  provided and designated by Landlord
for the general use and convenience of the occupants of the Parcel,  which areas
and  facilities  are  referred  to herein as "Common  Area".  This  right  shall
terminate upon the termination of this Lease.  Landlord  reserves the right from
time to time to make changes in the shape, size, location , amount and extent of
the  Common  Area.  Landlord  further  reserves  the  right to  promulgate  such
reasonable rules and regulations relating to the use of the Common Area, and any
part of parts thereof, as Landlord may deem appropriate for the best interest of
the  occupants of the Parcel.  the rules and  regulations  shall be binding upon
Tenant upon delivery of a copy of them to Tenant, and Tenant shall abide by them
and cooperate in their observance.  Such rules and regulations may be amended by
Landlord from time to time, with or without  advance notice,  and all amendments
shall be effective upon delivery of a copy of them to Tenant.  Tenant shall have
the  non-exclusive  use of no more than two  hundred  fifty (250) of the parking
spaces in the Common Area as  designated  from time to time by Landlord.  Tenant
shall not at any time park or permit  the  parking of  Tenant's  trucks or other
vehicles,  or the trucks or other vehicles of others,  adjacent to loading areas
so as to  interfere  in any way with the use of such areas,  nor shall Tenant at
any time park or permit  the  paring of  Tenant's  vehicles  or  trucks,  or the
vehicles or trucks of Tenant's suppliers or others, in any portion of the Common
Area not designated by Landlord for such use by Tenant. Tenant shall not abandon
any inoperative  vehicles or equipment on any portion of the Common Area. Tenant
shall make no alterations, improvements or additions to the Common Area.

Landlord shall operate,  manage, insure,  maintain and repair the Common Area in
good order  condition  and repair.  The manner in which the Common Area shall be
maintained and the expenditures  for such maintenance  shall be a the discretion
of Landlord.  The cost of such repair,  maintenance,  operation,  insurance  and
management, including without limitation, maintenance and repair of landscaping,
irrigation systems, paving,  sidewalks,  fences, and lighting, shall be a Common
Area Charge and Tenant shall pay to Landlord its share of such costs as provided
in Paragraph 12 below.

12. Common Area Charges. Tenant shall pay to landlord, ass additional rent, upon
demand but not more often than once each calendar month, an amount equal its Pro
Rata Share of the Common Area Charges as defined in  Paragraphs  8C,9,11 of this
Lease. Tenant acknowledges and agrees that the Common Area Charges shall include
an  additional  five  percent  (5%)  of the  actual  expenditures  in  order  to
compensate Landlord for accounting, management and processing services.

13.  Alterations.  Tenant shall not make or suffer to be made, any  alterations,
improvements or additions in , on, about or to the Premises or any part thereof,
without  the prior  written  consent of Landlord  and  without a valid  building
permit  issued by the  appropriate  governmental  authority.  As a condition  to
giving such  consent,  Landlord may require that Tenant agree to remove any such
alterations,  improvements or additions at the termination of this Lease, and to
restore the Premises to their prior  condition.  unless  Landlord  requires that
Tenant remove any such  alterations,  improvement or additions,  any alteration,
addition or  improvement  to the Premises,  except  movable  furniture and trade
fixtures  not affixed to the  Premises,  shall be come the  property of Landlord
upon  termination of the lease and shall remain upon and be surrendered with the
Premises at the termination of this Lease. Without limiting he generality of the
foregoing,  all heating,  lighting,  electrical (including all wiring,  conduit,
outlets, drops, buss ducts, main and subpanels), air conditioning, partitioning,
drapery,  and carpet  installations  made by Tenant regardless of how affixed to
the Premises, together with all other additions, alterations that have become an
integral part of the Building,  shall be and become the property of the Landlord
upon termination of the Lease, and shall not be deemed trade fixtures, and shall
remain upon and be  surrendered  with the  Premises at the  termination  of this
Lease.

If, during the term hereof,  any  alteration,  addition or change of any sort to
all or any portion of the Premises is required by law, regulation,  ordinance or
order of any public agency, Tenant shall promptly make the same at its sole cost
and expense. If during the term hereof, any alteration,  addition,  or change to
the Common Area is required by law, regulation, ordinance or order of any public
agency,  Landlord shall make the same and the cost of such alteration,  addition
or change  shall be a Common Area Charge and Tenant  shall pay its share of said
cost to Landlord as provided in Paragraph 12 above.


<PAGE>

14.  Acceptance of the Premises.  By entry and taking possession of the Premises
pursuant  to this  Lease,  Tenant  accepts  the  Premises  as  being in good and
sanitary order, condition and repair and accepts the Premises in their condition
existing as of the date of such  entry,  and Tenant  further  accepts the tenant
improvements  to be  constructed  by  Landlord,  if any, as being  completed  in
accordance with the plans and specifications  for such improvements,  except for
punch list items. Tenant shall be thirty (30) days after it has taken possession
of the  Premises to notify  Landlord of any  problems  needing  correction  with
respect to the HVAC, plumbing, and electrical, excluding any work done by Tenant
or its contractors, employees or agents in retrofitting the Premises to suit its
specific  requirements.  Tenant  acknowledges  that  neither  the  Landlord  nor
Landlord's agents has made any  representation or warranty as to the suitability
of the Premises to the conduct of Tenant's business. Any agreements,  warranties
or  representations  no expressly  contained  herein shall in no way bind either
Landlord  or Tenant,  and  Landlord  and Tenant  expressly  waive all claims for
damages  by  reason  of any  statement,  representation,  warranty,  promise  or
agreement,  if any, not  contained  in this Lease.  This Lease  constitutes  the
entire  understanding  between  the  parties  hereto  and  no  addition  do,  or
modification  of, any term or provision  of this Lease shall be effective  until
set forth in a writing signed by both Landlord and Tenant.

15.  Default

     A.  Events of  Default.  A breach of this Lease  shall  exist if any of the
     following  events  (hereinafter  referred to as "Event of  Default")  shall
     occur:

         1. Default in the payment when due of any  installment of rent or other
         payment  required to be made by Tenant  hereunder,  where such  default
         shall not have been cured within three (3) days after a written  notice
         of such default is given to Tenant;

         2.  Tenant's  failure to perform any other term,  covenant or condition
         contained in this Lease where such  failure  shall have  continued  for
         twenty  (20) days  after  written  notice of such  failure  is given to
         Tenant;

         3.  Tenant's vacating or abandonment of the Premises;

         4.  Tenant's assignment of its assets for the benefit of its creditors;

         5.  The   sequestration   of,  attachment  of,  or  execution  on,  any
         substantial  part of the property  essential to the conduct of tenant's
         business  shall have  occurred and Tenant shall have failed to obtain a
         return or release of such property within thirty (30) days  thereafter,
         or prior to sale  pursuant to such  sequestration,  attachment or levy,
         whichever is earlier;

         6. Tenant or any  guarantor  of tenant's  obligations  hereunder  shall
         commence any case,  proceeding or other action seeking  reorganization,
         arrangement,  adjustment, liquidation, dissolution or composition of it
         or  its  debts  under  any  law  relating  to  bankruptcy,  insolvency,
         reorganization  or relief  of  debtors,  or  seeking  appointment  of a
         receiver,  trustee,  custodian, or other similar official for it or for
         all or any substantial part of its property;

         7.  Tenant or any such  guarantor  shall take any  corporate  action to
         authorize any of the actions set forth in Clause 6 above;

         8. Any case, proceeding or other action against Tenant or any guarantor
         of tenant's obligations hereunder shall be commences seeking to have an
         order  for  relief   entered   against   it  as   debtor,   or  seeking
         reorganization,  arrangement,  adjustment, liquidation,  dissolution or
         composition  of it or its debts under any law  relating to  bankruptcy,
         insolvency, reorganization or relief of debtors, or seeking appointment
         of a receiver,  trustee, custodian, or other similar official for it or
         for  all or any  substantial  part  of its  property,  and  such  case,
         proceeding  or other  action  (i)  results in the 



<PAGE>

         entry of an order  for  relief  against  it which is not  fully  stayed
         within seven (7) business  days after the entry thereof or (ii) remains
         undismissed for a period of forty-five (45) days.

         B.  Remedies.  Upon  any  Event of  Default,  Landlord  shall  have the
         following  remedies,  in  addition  to all other  rights  and  remedies
         provided by law, to which Landlord may resort  cumulatively,  or in the
         alternative.

         1. Recovery of Rent.  Landlord  shall be entitled to keep this Lease in
         full force and effect  (whether or not Tenant shall have  abandoned the
         Premises)  and to enforce  all of its rights  and  remedies  under this
         Lease,  including  the right to  recover  rent and  other  sums as they
         become  due,  plus  interest  at the  Permitted  Rate  (as  defined  in
         Paragraph  33 below) from the due date of each  installment  of rent or
         other sum until paid.

         2.  Termination.  Landlord may  terminate  this Lease by giving  Tenant
         written notice of  termination.  On the giving of the notice all of the
         Tenant's  rights in the  Premises  and the  Building  and Parcel  shall
         terminate.  Upon the giving of the notice of termination,  Tenant shall
         surrender and vacate the Premises in the condition require by paragraph
         34, and Landlord may re-enter and take  possession  of the Premises and
         all the remaining  improvements  or property and eject Tenant or any of
         Tenant's subtenants,  assignees or other person or persons claiming any
         right  under or  through  Tenant or eject  some and not others or eject
         none.  This Lease may also be  terminated  by a  judgment  specifically
         providing for termination.  Any termination  under this paragraph shall
         not release  Tenant  from the  payment of any sum then due  Landlord or
         from any claim for damages or rent previously  accrued or then accruing
         against  Tenant.  In no event  shall  any one or more of the  following
         actions by landlord constitute a termination of this Lease:

                  a.  maintenance and preservation of the Premises;

                  b.  efforts to relet the Premises;

                  c.  appointment  of a receiver in order to protect  Landlord's
                  interest hereunder;

                  d. consent to any  subletting of the Premises or assignment of
                  this Lease by Tenant,  whether  pursuant to provisions  hereof
                  concerning subletting and assignment or otherwise; or

                  e. any other action by Landlord or Landlord's  agents intended
                  to mitigate the adverse  effects from any breach of this Lease
                  by Tenant.

         3.  Damages.  In  the  event  this  Lease  is  terminated  pursuant  to
         Subparagraph 15.B.2 above, or otherwise,  Landlord shall be entitled to
         damages in the following sums:

                  a. the worth at the time of award of the unpaid rent which has
                  been earned at the time of termination: plus

                  b. the  worth at the time of award of the  amount by which the
                  unpaid  rent which would have been  earned  after  termination
                  until the time of award exceeds the amount of such rental loss
                  that Tenant proves could have been reasonably avoided; plus

                  c. the  worth at the time of award of the  amount by which the
                  unpaid  rent for the  balance  of the term  after  the time of
                  award  exceeds  the amount of such rental loss that the Tenant
                  proves could be reasonably avoided; and

                  d. any other amount  necessary to compensate  Landlord for all
                  detriment  proximately  caused by Tenant's  failure to perform
                  tenant's  obligations  under  this  Lease,  or  which  in 



<PAGE>

                  the  ordinary  course  of  things  would be  likely  to result
                  therefrom including,  without limitation,  the following:  (I)
                  expenses fro  cleaning,  repairing or restoring  the Premises;
                  (ii) expenses for altering,  remodeling or otherwise improving
                  the   Premises  for  the  purpose  of   reletting,   including
                  installation   of   leasehold   improvements   (whether   such
                  installation be funded by a reduction of rent,  direct payment
                  or allowance to the succeeding  lessee,  or otherwise);  (iii)
                  real  estate  broker's  fees,   advertising  costs  and  other
                  expenses of reletting the Premises; (iv) costs of carrying the
                  Premises  such  as  taxes  and  insurance   premiums  thereon,
                  utilities and security  precautions;  (v) expenses in retaking
                  possession of the  Premises;  (vi)  attorneys'  fees and court
                  costs;   and  (vii)  any  unamortized  real  estate  brokerage
                  commission paid in connection with this Lease.

                  e. the "worth at the time of award" of the amounts referred to
                  in Subparagraphs (a) and (b) of this Paragraph, is computed by
                  allowing  interest at the  Permitted  Rate.  The "worth at the
                  time of award" of the amounts  referred to in Subparagraph (c)
                  of this  Paragraph is computed by  discounting  such amount at
                  the discount rat of the Federal reserve Board of San Francisco
                  at the time of award plus one percent (1%). The term "rent" as
                  used in the  Paragraph  shall  include all sums required to be
                  paid by  tenant  to  Landlord  pursuant  to the  terms of this
                  Lease.

16. Destruction.  In the event that any portion of the Premises are destroyed or
damaged by an uninsured  peril,  Landlord or Tenant may, upon written  notice to
the other,  given within thirty (30 days after the  occurrence of such damage or
destruction,  elect to terminate this Lease; provided however, that either party
may,  within  thirty (30) days after  receipt of such notice,  elect to make any
required  repairs and/or  restoration at such party's sole cost and expense,  in
which  event this Lease  shall  remain in full force and  effect,  and the party
having  made such  election  to restore or repair  shall  thereafter  diligently
proceed with such repairs and/or restorations.

In the event that any portion of the  Premises  are  destroyed  or damaged by an
uninsured  peril  to the  extent  of  fifty  percent  (50%)  or more of the then
replacement  cost of the Premises,  landlord may, upon written notice to Tenant,
given  within  thirty  (30)  days  after  the   occurrence  of  such  damage  or
destruction,  elect to  terminate  this Lease.  If  Landlord  does not give such
notice in writing  within such period,  Landlord shall be deemed to have elected
to rebuild or restore  the  Premises,  in which  event,  Landlord,  shall at its
expense,  promptly  rebuild or restore the Premises to their  condition prior to
the damage or destruction and Tenant shall pay to Landlord upon  commencement of
reconstruction the amount of any deductible from the insurance policy.


<PAGE>



In the event that, pursuant to the foregoing provisions,  Landlord is to rebuild
or restore  the  Premises,  Landlord  shall,  within  thirty (30) days after the
occurrence of such damage or destruction,  provide Tenant with written notice of
the time required for such repair or restoration.  If such period is longer than
two hundred  seventy (270) days from the issuance of a building  permit,  tenant
may,  within  thirty  (30) days after  receipt of  Landlord's  notice,  elect to
terminate  the Lease by giving  written  notice to  Landlord  of such  election,
whereupon the Lease shall immediately terminate. The period of time for Landlord
to complete the repair or restoration shall be extended for delays caused by the
fault or neglect of Tenant or because of acts of God, acts of publication, labor
disputes,  strikes, fires, freight embargoes, rainy or stormy weather, inability
to obtain materials,  supplies or fuels, acts of contractors or  subcontractors,
or  delay  of  contractors  or  subcontractors  due to  such  causes,  or  other
contingencies beyond of Landlord. Landlord's obligation to repair or restore the
Premises shall not include  restoration of Tenant's trade  fixtures,  equipment,
merchandise, or any improvements, alterations or additions made by Tenant to the
Premises.

17.  Condemnation

         A.  Definition of Terms.  For the purposes of this Lease,  the term (1)
         "Taking"  means a taking of the  Premises  or  damage  to the  Premises
         related to the  exercise of the power of eminent  domain and includes a
         voluntary  conveyance,  in lieu of court  proceedings,  to any  agency,
         authority,  public  utility,  person or corporate  entity  empowered to
         condemn  property;  (2) "Total  Taking"  means the taking of the entire
         Premises  or so much of the  Premises  as to prevent  or  substantially
         impair  the use  thereof  by  Tenant  for the  uses  herein  specified;
         provided,  however, in no event shall a Taking of less than ten percent
         (10%) of the Premises be deemed a Total  Taking;  (3) "partial  Taking"
         means the  taking  of only a portion  of the  Premises  which  does not
         constitute  a Total  Taking;  (4) "Date of Taking"  means the date upon
         which the title to the Premises,  or a portion  thereof,  passes to and
         vests  in the  condemnor  or  the  effective  date  of  any  order  for
         possession  if issued  prior to the date title vests in the  condemnor;
         and (5) "Award" means the amount of any award made, consideration paid,
         or damages ordered as a result of a Taking.

         B. Rights.  The parties  agree that in the event of a taking all rights
         between  them or in and to an Award  shall be as set forth  herein  and
         Tenant shall have no right to any Award except as set forth herein.

         C. Total Taking.  In the event of a Total Taking during the term hereof
         (1) the rights of Tenant  under the Lease and the  leasehold  estate of
         Tenant in and to the Premises  shall cease and terminate as of the Date
         of Taking;  (2) Landlord  shall refund to Tenant any prepaid rent;  (3)
         Tenant shall pay  Landlord  any rent or charges due Landlord  under the
         Lease, each prorated as of the Date of taking; (4) Tenant shall receive
         from  Landlord  those  portions  of the  Award  attributable  to  trade
         fixtures  of Tenant and for  moving  expenses  of  Tenant;  and (5) the
         remainder  of the  Award  shall  be  paid  to and  be the  property  of
         Landlord.

         D. Partial  Taking.  In the event of a Partial  Taking  during the term
         hereof (1) the rights of Tenant under the Lease and leasehold estate of
         Tenant in and to the  portions  of the  Premises  taken shall cease and
         terminate  as of the Date of  Taking;  (2) from and  after  the Date of
         Taking the Monthly  Installment of rent shall be an amount equal to the
         product  obtained  by  multiplying  the  Monthly  Installment  of  rent
         immediately  prior to the Taking by a fraction,  the numerator of which
         is the number of square feet contained in the Premises after the Taking
         and the denominator of which is the number of square feet contained the
         Premises  prior to the Taking;  (3) Tenant shall receive from the Award
         the portions of the award attributable to trade fixtures of Tenant; and
         (4) the  remainder of the Award shall be paid to and be the property of
         Landlord.


<PAGE>



18. Mechanics' Lien.  Tenant shall (A) pay for all labor and services  performed
for,  materials  used by or furnished to, Tenant or any  contractor  employed by
Tenant with respect to the Premises:  (B) indemnify,  defend,  protect, and hold
Landlord and the Premises harmless and free from any liens, claims, liabilities,
demand, encumbrances, or judgments created or suffered by reason of any labor or
services  performed  for,  materials  used by or  furnished  to,  Tenant  or any
contractor  employed by Tenant with respect to the Premises;  (C) give notice to
Landlord in writing five (5) days prior to employing  any laborer or  contractor
to perform service related to, or receiving materials for use upon the Premises;
and (D) permit Landlord to post a notice of nonresponsibility in accordance with
the  statutory  requirements  of  California  Civil  Code  Section  3094  or any
amendment  thereof.  In the event Tenant is required to post an improvement bond
with a public  agency in  connection  with the above,  Tenant  agrees to include
Landlord as an additional obligee.

19.  Inspection of the Premises.  Tenant shall permit Landlord and its agents to
enter the  Premises at any  reasonable  time for the purpose of  inspecting  the
same, performing Landlord's maintenance and repair  responsibilities,  posting a
notice of  non-responsibility  for alterations,  additions or repairs and at any
time within ninety (90) days prior to  expiration  of this Lease,  to place upon
the Premises, ordinary "For Lease" or "For Sale" signs.

20.  Compliance with Laws. Tenant shall, at its own cost, comply with all of the
requirements  of all municipal,  county,  state and federal  authorities  now in
force,  or which may hereafter be in force,  pertaining to the use and occupancy
of the Premises,  and shall faithfully observe all municipal,  county, state and
federal law,  statutes or  ordinances  no in force or which may  hereafter be in
force.  The judgment of any court of competent  jurisdiction or the admission of
Tenant in any action or proceeding  against tenant,  whether Landlord be a party
thereto or not,  that Tenant has violated  any such  ordinance or statute in the
use and  occupancy of the  Premises  shall be  conclusive  of the fact that such
violation by Tenant has occurred.

21.  Subordination.  The following  provisions  shall govern the relationship of
this  Lease to any  underlying  lease,  mortgage  or deed of  trust  which no or
hereafter  affects the Premises,  the Building and/or the Parcel,  or Landlord's
interest  or estate  therein  (the  "Project")  and any  renewal,  modification,
consolidation, replacement, or extension thereof (a "Security Instrument").

         A.  Priority.  This  Lease  is  subject  and  subordinate  to  Security
         Instruments  existing  as of the  commencement  Date.  However,  if any
         Lender so  requires,  this Lease shall become prior and superior to any
         such Security Instrument.

         B. Subsequent Security Instruments.  At Landlord's election, this Lease
         shall become subject and subordinate to any Security Instrument created
         after  the  Commencement  Date.   Notwithstanding  such  subordination,
         Tenant's  right  to  quiet  possession  of the  Premises  shall  not be
         disturbed  so long as Tenant is not in default and  performs all of its
         obligations under this Lease, unless this Lease is otherwise terminated
         pursuant to its terms.

         C. Documents.  Tenant shall execute any document or instrument required
         by  Landlord  or  any  Lender  to  make  this  lease  wither  prior  or
         subordinate  to a Security  Instrument,  which may  include  such other
         matters as the Lender  customarily  requires  in  connection  with such
         agreements,  including provisions that the Lender not be liable for (1)
         the return of the Security  Deposit unless the Lender  receives it from
         Landlord,  and (2) any defaults on the part of Landlord occurring prior
         to the  time  that  the  Lender  takes  possession  of the  Project  in
         connection  with the enforcement of its Security  Instrument.  Tenant's
         failure to execute any such document or instrument within ten (10) days
         after written demand therefor shall  constitute a default by Tenant or,
         at Landlord's option,  landlord may execute such documents on behalf of
         Tenant  as  tenant's   attorney-in-fact.   Tenant  does  hereby   make,
         constitute    and    irrevocably    appoint    Landlord   as   Tenant's
         attorney-in-fact  to execute  such  documents in  accordance  with this
         paragraph.
<PAGE>

         D. Tenant's Attornment. Tenant shall attorn (1) to any purchaser of the
         Premises at any foreclosure sale or private sale conducted  pursuant to
         any Security  Instrument  encumbering  the  project;  (2) to grantee or
         transferee designated in any deed given in lieu of foreclosure;  or (3)
         to the lessor  under any  underlying  ground  lease  should such ground
         lease be terminated.

         E. Lender. The term "Lender" shall mean (1) any beneficiary, mortgagee,
         secured  party,  or other  holder of any deed of trust,  mortgagee,  or
         other written security device or agreement  affecting the Project;  and
         (2) any lessor under any  underlying  lease under which  Landlord holds
         its interest in the Project.

22.  Holding Over.  This Lease shall  terminate  without  further  notice at the
expiration of the Lease Term. Any holding over by Tenant after  expiration shall
not  constitute  a renewal or  extension  or give Tenant any rights in or to the
Premises except as expressly  provided in this Lease. Any holding over after the
expiration  with the consent of Landlord shall be construed to be a tenancy from
month to month,  at one hundred fifty percent (150%) of the monthly rent for the
last month of the Lease Term, and shall otherwise be on the terms and conditions
herein specified insofar as applicable.

23.  Notices.  Any notice required or desired to be given under this Lease shall
be in writing with copies  directed as indicated  below and shall be  personally
served or given by mail.  Any notice  given by mail shall be deemed to have been
given when  forty-eight  (48) hours have  elapsed  from the time such notice was
deposited in the United State mails, certified and postage prepaid, addressed to
the party to be served with a copy as indicated herein at the last address given
by that party to the other party under the provisions of this Paragraph. At this
date of execution of this Lease, the address of Landlord is:

         511 Division Street
         Campbell, CA  95008

and the address of Tenant is:

         1188 Bordeaux Drive
         Sunnyvale, CA  94089
         Attn:  Mr. Michael S. Shimada, CFO

After the Commencement Date, the address of the Tenant shall be at the Premises.

23.  Attorneys'  Fees. In the event either party shall bring any action or legal
proceeding for damages for any alleged breach of any provision of this Lease, to
recover rent or  possession  of the  Premises,  to terminate  this Lease,  or to
enforce,  protect or  establish  any term or  covenant of this Lease or right or
remedy of either party,  the prevailing  party shall be entitled to receive as a
part of such action or proceeding,  reasonable  attorneys' fees and court costs,
including  attorneys' fees and costs for appeal, as may be fixed by the court or
jury.   The  term   "prevailing   party"  shall  mean  the  party  who  received
substantially the relief requested,  whether by settlement,  dismissal,  summary
judgment, or otherwise.


<PAGE>



25.  Nonassignment.

         A. Landlord's  Consent Required.  Tenant's interest in this Lease is no
         assignable, by operation of law or otherwise, nor shall Tenant have the
         right to  sublet  the  Premises,  transfer  of any  interest  of Tenant
         therein or permit any use of the Premises by another party, without the
         prior  written  consent of  Landlord  to such  assignment,  subletting,
         transfer  or  use,  which  consent  Landlord  agrees  not  to  withhold
         unreasonably  subject to the  provisions  of  Subparagraph  B below.  A
         consent  to one  assignment,  subletting,  occupancy  or use by another
         party shall not be deemed to be a consent to any subsequent assignment,
         subletting,  occupancy  or use by  another  party.  Any  assignment  or
         subletting without such consent shall be void and shall, at the options
         of landlord, terminate this Lease.

         Landlord's waiver or consent to any assignment or subletting  hereunder
         shall not relieve  Tenant from any  obligation  under this Lease unless
         the consent shall so provide.

         B.  Transferee  Information  Required.  If Tenant desires to assign its
         interest in this Lease or sublet the Premise,  or transfer any interest
         of Tenant  therein,  or permit the use of the Premises by another party
         (hereinafter  collectively  referred to as a "Transfer"),  Tenant shall
         give  Landlord at lease  thirty (30) days prior  written  notice of the
         proposed  Transfer  and  of  the  terms  of  such  proposed   Transfer,
         including,  but not limited to, the name and legal  composition  of the
         proposed transferee,  a financial statement of the proposed transferee,
         the nature of the  proposed  transferee's  business to be carried on in
         the Premises, the payment to be made or other consideration to be given
         to Tenant on account of the Transfer, and such pertinent information as
         may be  requested  by  Landlord,  all in  sufficient  detail  to enable
         Landlord  to  evaluate  the  Proposed   transfer  and  the  prospective
         transferee.  It is the  intent of the  parties  hereto  that this Lease
         shall confer upon Tenant only the right to use and occupy the Premises,
         and to exercise such other rights as are conferred  upon Tenant by this
         Lease.  The  parties  agree that this Lease is not  intended  to have a
         bonus  value nor to serve as a vehicle  whereby  Tenant may profit by a
         future  Transfer  of this  lease  or the  right  to use or  occupy  the
         Premises as a result of any favorable terms contained herein, or future
         changes in the market for lease space.  It is the intent of the parties
         that any such bonus  value  that may attach to this Lease  shall be and
         remain the  exclusive  property of Landlord,  except as provided for in
         Subparagraph  (2)  below.  Accordingly,  in the event  Tenant  seeks to
         Transfer its  interest in this Lease or the  Premises,  Landlord  shall
         have the following  options,  which may be exercised at its sole choice
         without limiting  Landlord in the exercise of any other right or remedy
         which Landlord may have by reason of such proposed Transfer:

                  1. Landlord may elect to terminate this Lease  effective as of
                  the  proposed  effective  date of the  proposed  Transfer  and
                  release Tenant from any further liability  hereunder  accruing
                  after such termination date by giving Tenant written notice of
                  such  termination  within  twenty  (20) days after  receipt by
                  Landlord of Tenant's  notice of intent to transfer as provided
                  above.  If  Landlord  makes such  election to  terminate  this
                  Lease, Tenant shall surrender the Premises, in accordance with
                  Paragraph 34, on or before the effective termination date; or

                  2.  Landlord  may  consent  to the  proposed  Transfer  on the
                  condition that tenant agrees to pay to Landlord, as additional
                  rent,  fifty  percent  (50%)  of any and all  rents  or  other
                  consideration  (including  key money)  received by Tenant from
                  the  transferee  by reason of such  Transfer  in excess of the
                  rent payable by Tenant to Landlord  under this Lease (less any
                  brokerage  commissions  or  advertising  expenses  incurred by
                  Tenant in  connection  with the  Transfer).  Tenant  expressly
                  agrees  that  the  foregoing  is a  reasonable  condition  for
                  obtaining Landlord's consent to any Transfer; or

                  3.  Landlord  may  reasonably  withhold  its  consent  to  the
                  proposed Transfer.
<PAGE>

26.  Successors.  The covenants and agreements  contained in this Lease shall be
binding on the parties  hereto and on their  respective  heirs,  successors  and
assigns (to the extent the Lease is assignable).

27. Mortgagee  Protection.  In the event of any default on the part of Landlord,
Tenant will give notice by registered or certified mail to any  beneficiary of a
deed of trust or mortgagee of a mortgage encumbering the Premises, whose address
shall  have been  furnished  to Tenant,  and shall  offer  such  beneficiary  or
mortgagee a reasonable opportunity to cure the default, including time to obtain
possession  of the  Premises by power of sale or judicial  foreclosure,  if such
should prove necessary to effect a cure.

28. Landlord Loan or Sale. Tenant agrees promptly  following request by Landlord
to (A)  execute  and  deliver to  Landlord  any  documents,  including  estoppel
certificates  presented to Tenant by Landlord, (i) certifying that this Lease is
unmodified and in full Force and effect and the date to which the rent and other
charges are paid in advance,  if any, and (ii) acknowledging that there are not,
to Tenant's  knowledge,  any uncured defaults on the part of Landlord hereunder,
and (iii)  evidencing  the  status of the Lease as may be  required  either by a
lender  making a loan to  Landlord  to be secured by a deed of trust or mortgage
covering the Premises or a purchaser  of the Premises  from  Landlord and (B) to
deliver to  Landlord  the  financial  statement  of Tenant  with an opinion of a
certified  public  accountant,  including  a balance  sheet and  profit and loss
statement,  for the last completed  fiscal year all prepared in accordance  with
generally accepted accounting principles consistently applied.  Tenant's failure
to deliver an estoppel  certificate  promptly following such request shall be an
Event of Default under this Lease.

29.  Surrender of Lease Not Merger.  The  voluntary  or other  surrender of this
Lease by Tenant, or a mutual cancellation  thereof,  shall not work a merger and
shall,  at the option of Landlord,  terminate  all or any existing  subleases or
subtenants, or operate as an assignment to Landlord of any or all such subleases
or subtenants.

30. Waiver. The waiver by Landlord or Tenant of any breach of any term, covenant
or  condition  herein  contained  shall  not be  deemed  to be a  waiver  of any
preceding or  succeeding  breach of the same or any other  covenant or condition
herein contained.

31.  General

         A. Captions. The captions and paragraph headings used in this Lease are
         for the purposes of  convenience  only.  They shall not be construed to
         limit or extend the  meaning of any part of this  Lease,  or be used to
         interpret  specific  sections.  The work(s) enclosed in quotation marks
         shall be construed as defined terms for purposed of this Lease. As used
         in this Lease,  the masculine,  feminine and neuter and the singular or
         plural  number  shall each be deemed to include the other  whenever the
         context so requires.

         B.  Definition of Landlord.  The term "Landlord" as used in this Lease,
         so far a the  covenants  or  obligations  on the part of  Landlord  are
         concerned,  shall be limited to mean and include  only the owner at the
         time in question of the fee title of the Premises,  and in the event of
         any transfer or transfers of the title of such fee, the Landlord herein
         named (and in case of any subsequent transfers or conveyances, the then
         grantor)  shall be after the date of such  transfer  or  conveyance  be
         automatically  freed and  relieved  of all  liability  with  respect to
         performance  of any  covenants or  obligations  on the part of Landlord
         contained in this Lease, thereafter to be performed;  provided that any
         funds in the hands of Landlord or the then  grantor at the time of such
         transfer, in which Tenant has an interest,  shall be turned over to the
         grantee. It is intended that the covenants and obligations contained in
         this Lease on the part of  Landlord  shall,  subject as  aforesaid,  be
         binding  upon  each  Landlord,  its  heirs,  personal  representatives,
         successors and assigns only during its respective period of ownership.
<PAGE>

         C. Time of Essence.  Time is of the essence for the performance of each
         term, covenant and condition of this Lease.

         D.  Severability.  In case any one or more of the provisions  contained
         herein, except for the payment of rent, shall for any reason be held to
         be invalid,  illegal or unenforceable in any respect,  such invalidity,
         illegality or unenforceability  shall not affect any other provision of
         this  Lease,  but  this  Lease  shall  be  construed  and  enforced  in
         accordance with the laws of the State of California.

         E. Joint and  Several  Liability.  If Tenant is more than one person or
         entity,  each such  person or entity  shall be  jointly  and  severally
         liable for the obligations of Tenant hereunder.

         F. Law.  The term "law"  shall  mean any  judicial  decision,  statute,
         constitution,  ordinance, resolution,  regulation, rule, administrative
         order, or other  requirement of any government agency or authority have
         jurisdiction over the parties to this Lease or the Premises or both, in
         effect at the  Commencement  Date of this Lease or any time  during the
         Lease Term, including , without limitation,  any regulation,  order, or
         policy  of any  quasi-official  entity  or body  (e.g.,  board  of fire
         examiners, public utility or special district).

         G. Agent.  As used herein the term "Agent" shall mean,  with respect to
         either   Landlord  or  Tenant,   its  respective   agents,   employees,
         contractors ( and their subcontractors),  and invitees (and in the case
         of Tenant, its subtenants).

         H.  WAIVER OF JURY  TRIAL.  LANDLORD  AND  TENANT  HEREBY  WAIVE  THEIR
         RESPECTIVE  RIGHT  TO  TRIAL BY JURY OF ANY  CAUSE  OF  ACTION,  CLAIM,
         COUNTERCLAIM  OR  CROSS-COMPLAINT  IN ANY  ACTION,  PROCEEDING,  AND/OR
         HEARING  BROUGHT BY EITHER  LANDLORD  AGAINST  TENANT OR TENANT AGAINST
         LANDLORD  ON ANY  MATTER  WHATSOEVER  ARISING  OUT  OF,  OR IN ANY  WAY
         CONNECTED  WITH, THIS LEASE,  THE  RELATIONSHIP OF LANDLORD AND TENANT,
         TENANT'S  USE OR  OCCUPANCY  OF THE  PREMISES OR ANY CLAIM OF INJURY OR
         DAMAGE,  OR THE  ENFORCEMENT OF ANY REMEDY UNDER ANY LAW,  STATUTE,  OR
         REGULATION, EMERGENCY OR OTHERWISE, NO OR HEREAFTER IN EFFECT.

         INITIALS:         LANDLORD

                           TENANT

32. Sign.  Tenant shall not place or permit to be placed any sign or  decoration
on the land or the exterior of the Building without the prior written consent of
Landlord.  Tenant, upon written notice by Landlord, shall immediately remove any
sign or decoration  that Tenant has placed or permitted to be placed on the land
or the exterior of the Building  without the prior written  consent of Landlord,
and if Tenant  fails to so remove such sign or  decoration  within five (5) days
after Landlord's written notice, Landlord may enter upon the Premises and remove
said sign or decoration  and Tenant agrees to pay Landlord,  as additional  rent
upon demand, the cost of such removal.  At the termination of this Lease, Tenant
shall  remove any sign which it has placed on the Parcel or  Building  and shall
repair any damage caused by the installation or removal of such sign.


<PAGE>



33.  Interest on Past Due  Obligations.  Any Monthly  Installment of rent or any
other sum due from Tenant  under this Lease which is received by Landlord  after
the date the same is due shall bear  interest  from said due date until paid, at
an annual rate equal to the lesser of (the "Permitted Rate"): (1) twelve percent
(12%); or (2) five percent (5%) plus the rate established by the Federal Reserve
Bank  of  San  Francisco,  as of  the  twenty-fifth  (25th)  day  of  the  month
immediately preceding the due date, on advances to member banks under Section 13
and 13(a) of the Federal Reserve Act, as now in effect or hereafter from time to
time amended.  Payment of such interest  shall not excuse or cure any default by
Tenant. In addition,  Tenant shall pay all costs and attorneys' fees incurred by
Landlord in collection of such amounts.

34.  Surrender of the  Premises.  On the last day of the term hereof,  or on the
sooner  termination  of this  Lease,  tenant  shall  surrender  the  Premises to
Landlord in their condition  existing as of the Commencement Date of this Lease,
ordinary wear and tear  excepted,  with all  originally  painted  interior walls
washed, and other interior walls cleaned, and repaired or replaced,, all carpets
shampooed and cleaned,  the air conditioning and heating equipment  serviced and
repaired by a reputable and licensed service firm, all floors cleaned and waxed,
all to the  reasonable  satisfaction  of  Landlord.  Tenant  shall remove all of
Tenant's  personal  property  and  trade  fixtures  from the  Premises,  and all
property not so removed shall be deemed abandoned by Tenant. Tenant, at its sole
cost,  shall repair any damage to the Premises caused by the removal of Tenant's
personal property,  machinery and equipment, which repair shall include, without
limitation,  the patching and filling of holes and repair of structural  damage.
If the Premises are not o surrendered at the  termination of this Lease,  Tenant
will indemnify, defend, protect and hold Landlord harmless from and against loss
or  liability  resulting  from delay by Tenant in so  surrendering  the Premises
including without limitation, any claims made by any succeeding tenant or losses
to Landlord due to lost opportunities to lease to succeeding tenants.

35.  Authority.  The undersigned  parties,  hereby warrant that they have proper
authority  and are  empowered  to execute  this Lease on behalf of Landlord  and
Tenant, respectively.

36.  Public  Record.  This Lease is made subject to all matters of public record
affecting title to the property of which the Premises or a part.

37. Brokers.  Tenant  represents and warrants to Landlord that it has dealt only
with Jeff Duke of Equus Associates respecting this transaction and hereby agrees
to  indemnify  and  hold  Landlord  harmless  from  and  against  any  brokerage
commission or fee, obligation,  claim or damage (including attorneys' fees) paid
or  incurred  respecting  any  other  broker  claiming  through  Tenant  or with
which/whom  Tenant has dealt. It is acknowledged  that one or more of Landlord's
partners may be real estate brokers.

38. Limitation on Landlord's  Liability.  Tenant,  for itself and its successors
and assigns (to the extent this Lease is assignable),  hereby agrees that in the
event of any actual,  alleged,  breach or default by  Landlord  under this Lease
that:

         A) Tenant's  sole and exclusive  remedy  against  Landlord  shall be as
         against Landlord's interest in the Building;

         B) No partner or officer of any  partner of  Landlord  shall be sued or
         named as a party in a suit or action  (except  as may be  necessary  to
         secure jurisdiction of the partnership);

         C) No service of process  shall be made against any partner of Landlord
         (except as may be necessary to secure jurisdiction of the partnership);

         D) No partner of  Landlord  shall be  required  to answer or  otherwise
         plead to any service of process;

         E) No judgment will be taken against any partner of Landlord;
<PAGE>

         F) Any judgment taken against any partner of Landlord maybe vacated and
         set aside at any time nunc pro tunc;

         G) No writ of execution  will ever be levied  against the assets of any
         partner of Landlord;

         H) The covenants and  agreements of Tenant set forth in this section 38
         shall be enforceable by Landlord and any partner of Landlord.

39.  Hazardous Material

         A.  Definitions.  As used herein,  the term "Hazardous  Material" shall
         mean any substance; (i) the presence of which requires investigation or
         remediation  under any federal,  state or local  statutes,  regulation,
         ordinance,  order,  action,  policy or  common  law;  (ii)  which is or
         becomes defined "hazardous waste", "hazardous substance",  pollutant or
         contaminant under any federal, state or local statute, regulation, rule
         or ordinance or amendments thereto including,  without limitation,  the
         Comprehensive Environmental Response, Compensation and Liability Action
         (42 U.S.C.  Section 9601 et seq.) and/or the Resource  Conservation and
         Recovery Act (42 U.S.C.  Section  6901 et seq.);  (iii) which is toxic,
         explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
         mutagenic,  or otherwise  hazardous and is or becomes  regulated by any
         governmental authority, agency, department,  commission, board, agency,
         or instrumentality of the United States, the State of California or any
         political  subdivision  thereof;  (iv)  the  presence  of  which on the
         Premises  causes or threatens to cause a nuisance  upon the Premises or
         to adjacent  properties  or poses or  threatens to pose a hazard to the
         health or safety of persons on or about the Premises;  (v) the presence
         of which on adjacent properties could constitute a trespass to Landlord
         or Tenant;  (vi) without  limitation  which contains  gasoline,  diesel
         fuel, or other petroleum  hydrocarbons;  (vii) without limitation which
         contains   polychlorinated   biphenyls   (PCBs),   asbestos,   or  urea
         formaldehyde form insulation; or (viii) without limitation radon gas.

         B. Landlord's Indemnity.  Landlord shall indemnify, defend, protect and
         hold  Tenant  harmless  from  and  against  all  liabilities,   claims,
         penalties,  fines,  response costs and other expenses  (including,  but
         limited to, reasonable attorneys' fees and consultants' fees and costs)
         arising out of,  resulting  from, or caused by any  Hazardous  Material
         used, generated, discharged, transported to or from, stored or disposed
         of by Landlord or its Agents in, on, under,  over, through or about the
         Premises and/or the surrounding real property.

         C.  Permitted  Use.  Subject  to the  compliance  by  Tenant  with  the
         provisions of Subparagraphs D, E, F, G, I, J and K below,  Tenant shall
         be permitted to use and store on the Premises those Hazardous Materials
         listed in Exhibit "D" attached  hereto in the  quantities  attached set
         forth in Exhibit "D".

         D.  Hazardous  Materials   Management  Plan.  Prior  to  Tenant  using,
         handling,  transporting or storing any Hazardous  Materials at or about
         the Premises  (including,  without limitation,  those listed in Exhibit
         "D"), Tenant shall submit to Landlord a Hazardous Materials  Management
         Plan ("HMMP") for Landlord's review and approval,  which approval shall
         not  be  unreasonably  withheld.  The  HMMP  shall  describe:  (i)  the
         quantities of each material to be used, (ii) the purpose for which each
         material is to be used,  (iii) the method of storage of each  material,
         (iv) the method of transporting  each material to and from the Premises
         and within the Premises,  (v) the methods Tenant will employ to monitor
         the use of the material  and to detect any leaks or potential  hazards,
         and (vi) any  other  information  any  department  of any  governmental
         entity (city,  state or federal)  requires prior to the issuance of any
         required  permit for the Premises or during  Tenant's  occupancy of the
         Premises.  Landlord  may,  but shall have no  obligation  to review and
         approve the foregoing information and HMO, and such review and approval
         or  failure  to review  and  approve  shall not act as an  estoppel  or
         otherwise waive Landlord's rights under this Lease or relieve

<PAGE>


         Tenant of its obligations  under this Lease. If Landlord  determines in
         good faith by inspection of the Premises or review of the HMMP that the
         methods in use or described  by Tenant are not  adequate in  Landlord's
         food  faith   judgment  to  prevent  or  eliminate   the  existence  of
         environmental hazards, then Tenant shall not use, handle, transport, or
         store such  Hazardous  Materials  at or about the  Premises  unless and
         until such  methods are approved by landlord in good faith and added to
         an approved  HMMP.  Once  approved by landlord,  Tenant shall  strictly
         comply  with the HMMP and  shall  not  change  its use,  operations  or
         procedures with respect to Hazardous  Materials  without  submitting an
         amended HMMP for Landlord's review and approval as provided above.

         E. Use  Restriction.  Except as specifically  allowed in Subparagraph C
         above,  Tenant shall not cause or permit any  Hazardous  Material to be
         used,  stored,  generated,  discharged,  transported  to  or  from,  or
         disposed of in or about the Premises, or any other land or improvements
         in the vicinity of the  Premises.  Without  limiting the  generality of
         foregoing,  Tenant,  at its  sole  cost,  shall  comply  with  all Laws
         relating to the storage,  use,  generation,  transport,  discharge  and
         disposal  by Tenant or its  Agents of any  Hazardous  Material.  If the
         presence of any Hazardous  Material on the Premises caused or permitted
         by Tenant or its Agents results in contamination of the Premises or any
         soil,  air,  ground or surface waters under,  through,  over, on, in or
         about the  Premises,  Tenant,  at it expense  shall  promptly  take all
         actions  necessary to return the Premises and/or the  surrounding  real
         property to the  condition  existing  prior to the  appearance  of such
         Hazardous Material.

         F. Tenant Indemnity.  Tenant shall defend,  protect,  hold harmless and
         indemnify  Landlord  and its Agents  and  Lenders  with  respect to all
         actions,  claims,  losses  (including,   diminution  in  value  of  the
         Premises),  fines,  penalties,  fees,  (including,  but not limited to,
         reasonable  attorneys' and consultants' fees and costs) costs, damages,
         liabilities, remediation costs, investigation costs, response costs and
         other  expenses  arising  out of,  resulting  from,  or  caused  by any
         Hazardous Material used, generated, discharged, transported to or from,
         stored or  disposed of by Tenant or its Agents,  in, on,  under,  over,
         through or about the Premises  and/or the  surrounding  real  property.
         Tenant shall not suffer any lien to be recorded against the Premises as
         a  consequence  for  the  disposal  of any  Hazardous  Material  on the
         Premises  by  Tenant or its  Agents,  including  any so  called  state,
         federal  or local  "super  fund"  lien  related to the "lean up" of any
         Hazardous Material in, over, on, under,  through or about the Premises.
         Landlord  agrees that Tenant shall have no liability or  obligation  to
         Landlord under this Lease with respect to any Hazardous Materials on or
         about the Premises,  which were not caused or  contributed to by Tenant
         or Tenant's Agents.

         G. Compliance. Tenant shall immediately notify Landlord of any inquiry,
         test, investigation, enforcement proceeding by or against Tenant or the
         Premises  concerning  any  Hazardous  Material.  Any  remediation  plan
         prepared by or on behalf of Tenant must be submitted  Landlord prior to
         conducting  any work  pursuance  to such plan and prior to submittal to
         any applicable  government authority and shall be subject to Landlord's
         consent.  Tenant  acknowledges  that  Landlord,  as  the  owner  of the
         Property,  at its  election,  shall have the sole  right to  negotiate,
         defend, approve and appeal any action taken or order issued with regard
         to any Hazardous Material by any applicable governmental authority.


<PAGE>



         H. Assignment and Subletting. It shall not be unreasonable for Landlord
         to withhold its consent to any proposed assignment or subletting if (i)
         the proposed assignee's or subtenant's  anticipated use of the Premises
         involves the storage, generation, discharge, transport, use or disposal
         of any Hazardous  Material not permitted  under  Subparagraph  C above;
         (ii) if the  proposed  assignee or subtenant  has been  required by any
         prior  landlord,  lender,  or  government  authority  to "clean  up" or
         remediate  any  Hazardous  Material  and has failed to  promptly do so;
         (iii) if the proposed assignee or subtenant is subject to investigation
         or  enforcement  order or proceeding by any  governmental  authority in
         connection with the use, generation, discharged, transport, disposal or
         storage of any material  amount of Hazardous  Material;  provided  that
         (ii) and (iii) will not apply in the case of a Fortune 500 Company.

         I. Surrender.  Upon the expiration or earlier termination of the Lease,
         Tenant, at its sole cost, shall remove all Hazardous Materials from the
         Premises  that  Tenant or its Agents  introduced  to the  Premises.  If
         Tenant  fails to so surrender  the  Premises,  Tenant shall  indemnify,
         protect, defend and hold Landlord harmless from and against all damages
         resulting  from Tenant's  failure to surrender the Premises as required
         by this Paragraph,  including, without limitation, any actions, claims,
         losses,  liabilities,  fees (including,  but not limited to, reasonable
         attorneys'  fees  and  consultants'  fees  and  costs),  fines,  costs,
         penalties, or damages occasioned by the inability to relet the Premises
         or a reduction in the fair market  and/or  rental value of the Premises
         by reason of the  existence of any  Hazardous  Materials  in, on, over,
         under, through or around the Premises.

         J.  Right to  Appoint  Consultant.  Landlord  shall  have the  right to
         appoint a consultant to conduct an investigation  to determine  whether
         any   Hazardous   Material  is  being  used,   generated,   discharged,
         transported to or from, stored or disposed of in, on, over, through, or
         about the Premises,  in an appropriate and lawful manner. If Tenant has
         violated any Law or covenant in this Lease  regarding the use,  storage
         or disposal of  Hazardous  Materials on or about the  Premises,  Tenant
         shall reimburse Landlord for the cost of such investigation. Tenant, at
         its expense,  shall comply with all reasonable  recommendations  of the
         consultant  required to conform  Tenant's  use,  storage or disposal of
         Hazardous Materials to the requirements of applicable Law or to fulfill
         the obligations of Tenant hereunder.

         K. Holding  over.  If any action of any kind is required to be taken by
         any governmental  authority to clean-up,  remove,  remediate or monitor
         Hazardous  Material (the presence of which is the result of the acts or
         omissions  of Tenant or its Agents)  and such  action is not  completed
         prior to the  expiration or earlier  termination  of the Lease,  Tenant
         shall be deemed to have impermissibly held over until such time as such
         required  action is  completed,  and Landlord  shall be entitled to all
         damages directly or indirectly incurred in connection with such holding
         over,  including  with  out  limitation,   damages  occasioned  by  the
         inability  to re-let the  Premises  or a  reduction  of the fair market
         and/or rental value of the Premises.

         L. Existing Environmental  Reports.  Tenant hereby acknowledges that it
         has received,  read and reviewed the reports and test result  described
         in Exhibit "E" attached hereto and made a part of hereof (the "Existing
         Environmental Reports").

         M. Provisions Survive Termination.  The provisions of this Paragraph 39
         shall survive expiration or termination of this Lease.

         N.  Controlling  Provisions.  The  provisions of this  Paragraph 39 are
         intended  to govern the  rights and  liabilities  of the  Landlord  and
         Tenant hereunder respecting Hazardous Materials to the exclusion of any
         other   provisions  in  this  Lease  that  might  otherwise  be  deemed
         applicable.  The  provisions of this  Paragraph 39 shall be controlling
         with respect to any provisions in the Lease that are inconsistent  with
         this Paragraph 39.
<PAGE>

40.  Option to Extend.

         A.  Provided that Tenant is not in default under this Lease at the time
         of  exercise  of the  hereinafter  described  option  or at the time of
         termination  of the then existing  term of this Lease,  as the case may
         be,  Tenant  shall have one (1) option to extend the term of this Lease
         for a period of five (5) years (the "Option  Term").  Said option shall
         be  exercised  only by written  notice  delivered to Landlord not later
         than one hundred eighty (180) days prior to the expiration  date of the
         then existing term of this Lease. In all respects, the terms, covenants
         and conditions of this Lease shall remain  unchanged  during the Option
         Term,  except that the Monthly  Installment  of rent payable during the
         Option Term, which shall be determined in accordance with  Subparagraph
         B and C below,  and  except  that there  shall be no further  option to
         extend the term of this Lease at the end of the Option Term.

         B. The Monthly Installment of rent payable during the Option Term shall
         be ninety-five percent (95%) of the fair market rental for the Premises
         as of the first day of the Option Term (the "Fair Market Rental");  but
         in no event shall the Monthly  Installment  of rent payable  during the
         Option Term be less than the Monthly Installment of rent payable during
         the last calendar month of the original Lease Term.

         C.  Promptly  following  exercise of the option to extend,  the parties
         shall  meet and  endeavor  to agree on the Fair  Market  Rental  of the
         Premises as of the first day of the Option  Term.  In  determining  the
         Fair Market  Rental for the  Premises,  the Premises  shall be compared
         only to buildings of a similar  quality and size. If within thirty (30)
         days after  exercise of the option,  the parties  cannot agree upon the
         Fair  Market  Rental,  the parties  shall  submit the matter to binding
         appraisal in accordance with the following procedure: Within sixty (60)
         days after exercise of the option, the parties shall either (a) jointly
         appoint an appraiser for this purpose or (b) failing this joint action,
         separately  designate a  disinterested  appraiser.  No person  shall be
         appointed or designated an appraiser unless he or she has at lease five
         (5) years experience n appraising  major  commercial  property in Santa
         Clara  County and is a member of a  recognized  society of real  estate
         appraisers. If, within thirty (30) days after the appointment,  the two
         appraisers reach agreement on the Fair Market Rental,  that value shall
         be binding and conclusive upon the parties.  If the two appraisers this
         appointed  cannot  reach  agreement on the  question  presented  within
         thirty  (30) days after  their  appointment,  then the  appraiser  thus
         appointed  shall appoint a third  disinterested  appraiser  having like
         qualifications. If within thirty (30) days after the appointment of the
         third  appraiser,  a majority of the appraiser agree on the Fair Market
         Rental, that value shall be binding and conclusive upon the parties. If
         within thirty (30) days after the appointment of the third appraiser, a
         majority of the  appraisers  cannot  reach  agreement  on the  question
         presented,  then the  appraisal  farthest  from the median of the three
         appraisals  shall be disregarded  and the mean average of the remaining
         two  appraisals  shall be  deemed to be the Fair  Market  Rental of the
         Premises  as of the first day of the  Option  Term and shall be binding
         and  conclusive  upon the  parties.  Each party  shall pay the fees and
         expenses of the  appraiser  appointed by it and shall share equally the
         fees  and  expenses  of the  third  appraiser.  If the  two  appraisers
         appointed by the parties  cannot agree on the  appointment of the third
         appraiser,  they or either of them shall give notice of such failure to
         agree  to the  parties  and if the  parties  fail  to  agree  upon  the
         selection  of such  third  appraiser  within  ten (10)  days  after the
         appraisers  appointed by the parties  give such notice,  then either of
         the  parties,   upon  notice  to  the  other  party  may  request  such
         appointment by the American Arbitration Association,  or on it failure,
         refusal or  inability  to act,  may apply for such  appointment  to the
         presiding judge of the Court of Santa Clara County, California.

41.  Third Opportunity to Lease.

         A. Definitions. As used in this Paragraph 41, the following terms shall
         be the following meanings:
<PAGE>

                  1. "Third  Opportunity  Space" shall mean the space located in
                  Building C commonly  known as 4415 Fortran Court and currently
                  lease to Novellus Systems, Inc. ("Novellus").

                  2. "Prior Right" or Prior Rights" shall mean (a) the option to
                  expand  into  the  Third  Opportunity  Space  which  has  been
                  previously  granted to AG Associated,  Inc.  ("AG") and/or (b)
                  the right of the first refusal covering the Third  Opportunity
                  Space which has been previously  granted to Novellus  Systems,
                  Inc.

                  3.  "Novellus  Lease"  shall mean the existing  lease  between
                  Landlord and Novellus covering the Third Opportunity Space.

         B. Third Opportunity Space.  Provided that (i) Tenant is not in default
         under this Lease;  (ii) this Lease is in full force and  effect;  (iii)
         Tenant has not assigned  this Lease and is in physical  occupancy of at
         least fifty percent (50%) of the area of the Premises; and (iv) neither
         AG nor Novellus has exercised its respective  Prior Right and all Prior
         Rights have expired;  then, and only then,  tenant shall have the right
         to lease the Third  Opportunity  Space, as the Third  Opportunity Space
         becomes  available  upon the  expiration of the Novellus Lease subject,
         however, to the following terms and conditions.

         C.  Landlord's   Notice.  If  Landlord  proposes  to  lease  the  Third
         Opportunity  Space to a  prospective  tenant  after the  expiration  of
         Novellus Lease and all conditions set forth in Subparagraph B above are
         satisfied,  the Landlord  shall notify  Tenant in writing  ("Landlord's
         Notice")  of the  form  of  lease  Landlord  intends  to  use,  and the
         following  basic business terms upon which Landlord is willing to lease
         such space  (collectively  referred  to herein as the  "Basic  Business
         Terms"):  (i) the description of the particular Third Opportunity Space
         then  available  (the  "Proposed  Space");  (ii) the term of the lease;
         (iii) the tenants improvements landlord is willing to construct or that
         it will required to be  constructed  and the  contribution  Landlord is
         willing to make to pay for such tenant  improvements,  if any; (iv) the
         rent for the initial term or the formula to be used to  determine  such
         rent (including,  if applicable the rental  commencement date, Tenant's
         share of taxes,  assessments,  operating expenses,  insurance costs and
         the like; (v) any option or options to extend (including the rent to be
         charged or the formula for such charges  during the extension  periods;
         and (vi) any other material business term Landlord elects to specify.

         D. Second Lease. If Tenant,  within two (2) business days after receipt
         of Landlord's  Notice,  indicated in writing its agreement to lease the
         Proposed Space on the Basic Business Terms stated in Landlord's  Notice
         (the "Second  Lease"),  and within two (2) days after Tenant's  receipt
         thereof,  Tenant  executes  and returns to Landlord  the Second  Lease,
         Landlord shall lease to Tenant and Tenant shall lease from Landlord the
         Proposed  Space on the terms and  conditions  contained  in the  Second
         Lease, provided, however, that this Lease shall be modified to include,
         and the Second Lease shall include, a cross-default provision providing
         that  Tenant  will be in default  under both the Second  Lease and this
         Lease, if Tenant is in default under either Lease.

         E.  Failure to  Exercise.  If Tenant  does not  indicate in writing its
         agreement  to lease  the  Proposed  Space  on the  terms  contained  in
         Landlord's  Notice  within the two (2) business day time period,  or if
         Tenant does not execute and return to Landlord  the Second Lease within
         two (20) business days after Tenant's  receipt  thereof,  then Landlord
         shall  thereafter have the unfettered right to lease the Proposed Space
         to any third party on any terms and conditions.

         F.  Termination.  The provisions of this Paragraph shall terminate upon
         (i) the expiration of earlier  termination  of this Lease;  or (ii) any
         assignment by Tenant of its interest in this Lease or the subletting by
         Tenant of substantially  all of the Premises for  substantially  all of
         the remainder of the Lease Term; or (iii) as to any particular Proposed
         Space,  Tenant's  failure to exercise its right to lease granted herein
         as to such Proposed  Space as its first  opportunity  to do so, or (iv)
         the  exercise of any Prior right by any party then  holding  such Prior
         Right.
<PAGE>

IN WITNESS  WHEREOF,  the parties have executed this  Agreement on the dates set
forth below.

TENANT                                    LANDLORD

ELEXSYS INTERNATIONAL, INC.               SOUTH BY/FORTRAN, a California limited
a California corporation                  partnership

By:                                       By:

Printed:                                  Printed:

Title:                                    Title:

Dated:                                    Dated:



<PAGE>



                                    EXHIBIT A

Exhibit A is a map of the buildings on Fortan Court with square  footage as well
as a map of the immediate vicinity.


<PAGE>



                                    EXHIBIT B

LEGAL DESCRIPTION

All that read property situated in the City of San Jose, Counter of Santa Clara,
State of California, described as follows:

Beginning at the  Southwesterly  corner of that certain 31.74 acre tract of land
described in the deed from The First  National Bank of San Jose, a  corporation,
to F. W. Zanker and Curtner Zanker,  date May 5, 1939,  recorded Mary 8, 1939 in
Book 934 Official Records, page 16, Santa Clara County Records, in the Northerly
line Alviso-Milpitas Road, thence from said point of beginning N. 89 deg. 35' E.
630.30 feet to the Southeasterly corner thereof;  thence along the Easterly line
of said 31.74 acre tract for the three  following  courses and  distances:  N. 1
deg. 13'E.  768.9 feet, N. 0 deg. 57' E. 597.96 feet and N. 0 deg. 31' E. 149.97
feet to the  Southeasterly  corner  of that  certain  9.316  acre  tract of land
described in the deed from F. W. Zanker,  et al, to B. S. Brazil,  a single man,
dated  October  25,  1943,  recorded  November  16,  1943 in Book 1176  Official
Records, page 21, Santa Clara County Records; thence S. 89 deg. 35' W, along the
Southerly line of said 9.316 acre tract 651.78 feet to the Southwesterly  corner
thereof in the Westerly line of said 31.74 tract;  thence S. 0 deg. 08' W. along
said last mentioned line 1512.88 feet to the point of beginning.

Excepting  therefrom  that portion  thereof  conveyed to the City of San Jose, a
municipal  corporation,  recorded  September 2, 1985,  in Book J828,  page 1719,
Official Records, described as follows:

Beginning at the  Southeasterly  corner of that certain 31.74 acre tract of land
described in the deed from The First  National Bank of San Jose, a  corporation,
to F. W. Zanker and Curtner Zanker,  dated May 5, 1939,  recorded May 8, 1939 in
Book 934 Official Records, page 16, Santa Clara County Records, said point being
on the Northerly  line of  Alviso-Milpitas  Road,  thence  leaving said point of
beginning  alone the  Easterly  line of said 31.74 acre parcel N. 1 deg.  13' E.
30.00 feet to the true pint of beginning of the parcel  herein being  described:
thence  leaving said true point of beginning  and said  Easterly  line along the
following courses and distances;  From a tangent bearing of N. 88 deg. 47'00" W.
along a curve to the right with a radius for 50.0 feet,  through a central angle
of 36 deg.  52'12" for an arc length of 32.18 feet;  N. 1 deg.  13.00' E. 361.13
feet; N. 0 deg. 57'00" E. 597.93 feet; N. 0 deg.  31'52" E. 18.69 feet;  along a
tangent  curve to the left with a radius of 40.00 feet,  through a central angle
of 90 deg.  56'58" for an arc length of 63.50 feet to a point on a line parallel
with and  distant  90.00  feet  Southerly,  measured  at right  angles  from the
Southerly  line of that certain 9.316 acre parcel of land  described in the deed
from F. W. Zanker,  et al, to B. S. Brazil,  recorded  November 16, 1943 in Book
1176 Official Records, at page 21, Santa Clara County Records; thence along said
parallel line, s. 89 deg.  34'54" W. 579.99 feet to a point on the Westerly line
of said 31.74 acre parcel of land;  thence leaving said parallel line along said
Westerly line, N. 0 deg. 06'10" E. 90.00 feet to the Southwesterly corner of the
hereinabove described 9.316 acre parcel; thence leaving said Westerly line along
the  Southerly  line of said 9.316 acre parcel , N. 89 de. 34'54" E. 651.24 feet
to the Southeasterly corner thereof,  said corner lying in said Easterly line of
the hereinabove described 31.74 acre parcel, thence along said Easterly line the
following  course and  distances:  S. 0 deg.  31'52" W. 149.08  feet;  S. 0 deg.
57'00" W. 598.11 feet and S. 1 deg.  13"00"  W.471.20  feet to the true point of
beginning.

ALSO EXCEPTING THEREFROM all that portion conveyed to the State of California by
Grant Deed recorded August 31, 1994 in Book N 579, Page 2028,  Official  Records
described as follows:  Being a portion of that certain  parcel of land described
in the Deed from Ray H.  Collishaw  and Earlyn  Collishaw,  husband  and wife to
William L. Marocco, a single man, recorded May 4, 1982 in Book G 762 of Official
Records at Page 218, Santa Clara County Records.


<PAGE>



Beginning at the  southeast  corner of said parcel  conveyed to Marocco;  thence
from said Point of Beginning,  along the southerly line of said parcel  conveyed
to Marocco N. 89 deg.  01'16" W.  626.45  feet to the  southwest  corner of said
parcel  conveyed  to  Marocco;  thence  along the  westerly  line of said parcel
conveyed  to  Marocco N. 1 deg.  13'13" E.  227.77  feet;  thence  leaving  said
westerly line,  from a tangent bearing of S. 67 deg. 46'42" E., along a curve to
the  right  with a radius  of 275.00  feet,  through a central  angle of 18 deg.
08'37"  for an arc length of 87.08  feet;  thence s. 49 deg.  38'05" E.,  103.64
feet;  thence  along a tangent  curve to the left with a radius of 275.00  feet,
through a  central  angle of 34 de.  57'21"  for an arc  length of 167.78  feet;
thence S. 84 deg.  35'26" E. 318.98 feet to a point in the easterly line of said
parcel conveyed to Marocco said easterly line S. 2 deg. 20'03" W., 31.97 feet to
the Point of Beginning.



<PAGE>


                                   EXHIBIT "C"

                              IMPROVEMENT AGREEMENT

         This  Improvement  Agreement is made part of that Lease dated March 11,
1996 (the  "Lease") by and  between  SOUTH  BAY/FORTRAN,  a  California  limited
partnership,   ("Landlord"),  and  ELEXSYS  INTERNATIONAL,  INC.,  a  California
corporation  ("Tenant").  Landlord and Tenant agree that the following terms are
part of the Lease:

         1. Purpose of Improvement  Agreement.  The purpose of this  Improvement
Agreement is to set forth the rights and obligations of Landlord and Tenant with
respect to the construction of the Tenant Improvements in the Premises.

         2. Definitions.  As used in this Improvement  Agreement,  the following
terms shall have the following meanings,  and initially  capitalized terms which
are not defined below,  but which are defined in the lease and which are used in
this  Improvement  Agreement,  shall have the  meanings  ascribed to them by the
Lease:

                  A. Final  Tenant  Improvement  Plans.  The term "Final  Tenant
Improvement  Plans" shall mean those plans and  specifications for the Tenant is
to be  constructed by Landlord which are to be designed and approved by Landlord
and Tenant.

                  B. Tenant Improvements.  The term "Tenant  Improvements" shall
mean the tenant  improvements  to be constructed by Landlord in accordance  with
the Final Tenant Improvements Plans.

                  C. Landlord's Code Work. The term "Landlord's Code Work" shall
mean all  work  required  to bring  the  Premises  as they  exist on the date of
execution of this Lease (prior to the  construction of any Tenant  Improvements)
into compliance with all governmental codes, ordinances and statutes,  including
Americans With Disabilities Act ("ADA"). If the Tenant Improvements are going to
replace or  substantially  alter any existing  improvement  which are not now in
compliance with governmental codes, then Landlord shall not be required to bring
such existing improvements into compliance with governmental codes and such work
shall be excluded from the definitions  "Landlord's Code Work". For example,  if
any existing bathrooms which do not comply with ADA requirements are going to be
replaced or substantially altered by the Tenant Improvements then Landlord shall
not be required to make any alterations to such existing bathrooms.

                  D.  Substantial  Completion and  Substantially  Complete.  The
terms "Substantial  Completion" and "Substantially Complete" shall each mean the
date  when  all of the  following  have  occurred  with  respect  to the  Tenant
Improvements:   (i)  the  construction  of  the  Tenant  Improvements  has  been
substantially  completed in accordance  with the provisions of this  Improvement
Agreement  (except  for  minor  punch  list  items  which  do not  substantially
interfere  with  the  Tenant's  use of the  Premises);  and  (ii)  the  Building
department of the City of San Jose has  completed  its final  inspection of such
improvements  and has "signed off" the building  inspection  card approving such
work as complete.


<PAGE>



                  E. TI Costs.  The term "TI Costs"  shall mean and  include all
costs  and  expenses  paid  or  incurred  by  Landlord  for  any  and all of the
following:  architectural  and engineering  fees and costs,  all building permit
fees  and  taxes  and  other  governmental  fees  and  taxes  required  for  the
construction  and  occupancy  of the  Tenant  Improvements,  all  of  Landlord's
contractors'  and  subcontractors'  prices and fees for  constructing the Tenant
Improvements,  including the cost of all  partitioning,  utility  systems,  fire
sprinkler  systems,  heating,  ventilating  and  air  conditioning  systems  and
equipment, rook screens,  electrical distribution facilities,  wiring, lighting,
ceilings,  installation of fixtures and equipment, restrooms, carpeting, and all
other improvements and alterations  required to finish the existing Building for
occupancy  by Tenant in  accordance  with the Final  Tenant  Improvement  Plans;
provided,  however, TI Costs shall not include any costs attributable Landlord's
Code  Work.  The  Landlord's  contractors'  price for  constructing  the  Tenant
Improvements  shall include the cost of a job superintendent and project manager
plus a fee of five percent (5%) of all other TI Costs.

                  F. Maximum TI Allowance. The term "Maximum TI Allowance" shall
mean a sum  equal to $11.90  multiplied  by the  number of square  feet of floor
space contained  within the Premises.  The square footage of the Premises is 66,
638 sq. ft.  Accordingly,  the Maximum TI Allowance is Seven Hundred Eighty-Nine
Thousand Seven Hundred Seventy-Nine Dollars ($789,779.00).

                  G. Excess TI Costs.  The term" Excess TI Costs" shall mean all
TI Costs in excess of the Maximum TI Allowance.

         3.  Design of Tenant Improvements

                  A. Preliminary Tenant  Improvement Plans.  Tenant shall, on or
before  April 10 , 1996,  prepare  and  deliver to  Landlord  for its review and
approval preliminary plans for the Tenant Improvements,  which preliminary plans
shall show Tenant's desired floor plan, layout,  electrical  requirements,  HVAC
requirements  and general  requirements in sufficient  detail in order to permit
Landlord  to  prepare  working  drawings  for  the  Tenant   Improvements   (the
"Preliminary  Tenant  Improvement  Plans").  Within five (5) business days after
receipt of the  Preliminary  Tenant  Improvement  Plans,  Landlord  shall wither
approve such plans or notify Tenant in writing of any request for changes to the
Preliminary  Tenant  Improvement  Plans.  If  Landlord  submits  any request for
changes,  the  parties  shall  meet and  confer to  develop  Preliminary  Tenant
Improvement  Plans that are  acceptable  to both Landlord and Tenant within five
(5) business days after landlord has notifies Tenant of its request for changes.

                  B. Development and Approval of Tenant  Improvement Plans. Once
the  Preliminary  Tenant  Improvement  Plans have been  approved by Landlord and
Tenant,  Landlord  shall  complete and submit to tenant for its  approval  final
working  drawings for the Tenant  Improvements.  Tenant shall  approve the final
working  drawings for the Tenant  Improvements  or notify Landlord in writing of
its specific  request for changes within five (5) business days after receipt of
the working  drawings from Landlord.  If tenant submits any request for changes,
the parties shall confer and reach agreement upon the final working drawings for
the Tenant  Improvements within five (5) business days after Tenant has notified
Landlord of its request for  changes.  When  Landlord  and Tenant agree upon the
final working drawings for the Tenant  Improvements,  a  representative  of each
shall sign the same.  The final  working  drawings so  approved by Landlord  and
Tenant are referred to herein as the "Final Tenant Improvement Plans".

         4. Construction of Tenant Improvements.  Landlord shall, at the expense
of Landlord and Tenant as specified in Paragraph 10 below,  construct the Tenant
Improvements in accordance with the following:

                  A. Building  Permit.  As soon as the Final Tenant  Improvement
Plans have been  approved by Landlord  and  Tenant,  Landlord  shall apply for a
building permit for the Tenant  Improvements,  and shall  diligently  pursue the
obtaining of such building permit.
<PAGE>

                  B.  Commencement  of  Tenant  Improvements.  As  soon  as  the
building  permit for the Tenant  Improvements  has been issued,  Landlord  shall
commence  construction of the Tenant Improvements and shall diligently prosecute
such construction to completion.

         5.  Construction  Contract.  The  following  shall govern the manner in
which the construction contract shall be let by Landlord for the construction of
the Tenant Improvements:

                  A. Landlord  shall engage South Bay  Construction  Company,  a
California  corporation  ("SBCC") as the general  contractor  to  construct  the
Tenant  Improvements.  Tenant  acknowledges  that  SBCC is an  affiliate  of the
Landlord.

                  B. All major  subcontractors for the Tenant Improvements shall
be chosen by a competitive  bid process where (i) tenant shall have the right to
approve  subcontractors  who  bid  on  specific  parts  of  the  Job;  (ii)  the
subcontractor  shall be awarded to the lowest responsible bidder unless Landlord
and Tenant otherwise agree (which decision may arise from concerns as to whether
the subcontractor will be able to complete it work in a timely manner; and (iii)
Tenant  shall have the right to review and  approve  all  subcontracts  prior to
submission to subcontractors.

                  C. The construction  contract with SBCC shall provide for SBCC
to be compensated or reimbursed as follows with respect to the  construction  of
the Tenant Improvements: (i) to be paid a general contractor's fee equal to five
percent  (5%)  of all TI  Costs;  (ii) to be  reimburses  for  all  payments  to
subcontractors or material  suppliers;  (iii) to be reimbursed for the following
cost items (a)  temporary  electric  power,  (b)  on-site  office  trailer,  (c)
temporary  on-site  toilets,  (d) trash  removal  and site  clean  up,  (e) long
distance telephone charges,  (f) messenger and air courier charges;  and (vi) to
be reimbursed for the following hour rates for the cost of a job  superintendent
($55.00/hr) and of a project manager ($68.00/hr).

         6.  Substitutions.  In developing the  Preliminary  Tenant  Improvement
Plans and Final Tenant  Improvement  Plans,  Tenant shall  designate  and select
material and equipment  which can be obtained with normal lead times.  If at any
time  during the plan  development  process or the  course of  construction,  it
becomes apparent that a particular  material or item of equipment is not or will
not be obtainable within a reasonable period of time, the parties shall meet and
confer to find a substitute therefor.

         7. Changes to Approved Plan.  Once the Final Tenant  Improvement  Plans
have been approved by Landlord and Tenant, neither shall have the right to order
extra  work or change  orders  with  respect to the  construction  of the Tenant
Improvements without the prior written consent of the other, which consent shall
not be unreasonably  withheld or delayed,  provided there is a reasonable  basis
for such change or such change is required by any Law.  All extra work or change
orders  requested by either  Landlord or Tenant shall be made in writing,  shall
specify any added or reduced cost and/or construction time resulting  therefrom,
and shall become effective and a part of the Final Tenant Improvement Plans once
approved  in writing by both  parties.  If a change  order  requested  by Tenant
results in a net  increase  in the TI Costs  which  causes the total TI Costs to
exceed the Maximum TI Allowance, Tenant shall pay to Landlord the amount of such
increase  caused by the change order  requested by Tenant in accordance with the
provisions of Paragraph 10 below.


<PAGE>



         8. Delivery and  Possession,  Punch List and Acceptance  Agreement.  As
soon as the Tenant Improvements are Substantially Completed, Landlord and Tenant
shall together walk through the Premises and inspect all Tenant  Improvements so
completed,  using  reasonable  efforts to discover all  uncompleted or defective
construction  in the Tenant  Improvements.  Unless any  uncompleted or defective
construction  would materially  affect Tenant's ability to conduct its business,
then when such  inspection has been  completed,  tenant shall sign an acceptance
agreement  which  shall (i)  include a list of all :punch  List" items which the
parties  agree are to be corrected  by Landlord and (ii) state the  Commencement
Date.  As soon  as such  inspection  has  been  completed  and  such  acceptance
executed,  Landlord shall deliver possession of the Premises to Tenant. Landlord
shall use reasonable efforts to complete and/ore repair such "punch list " items
within thirty (30) days after receiving the acceptance agreement and punch list.
Landlord  shall have no  obligation  to deliver  possession  of the  Premises to
Tenant until such procedures regarding the preparation of t a punch list and the
execution of the acceptance agreement have completed. Tenant's taking possession
of any part of the  Premises  shall be deemed to be an  acceptance  by Tenant of
Landlord's  work of improvement in such part as complete and in accordance  with
the terms of the Lease except for the punch list items noted and latent  defects
that could not reasonable  have been  discovered by Tenant during its inspection
of the Tenant  Improvements  prior to  completion of the  acceptance  agreement.
Notwithstanding  anything  contained  herein,  Tenant's  obligation  to pay  the
Monthly  Installment of rent and  Additional  Rent shall commence as provided in
the Lease,  regardless of whether Tenant  completes such  inspection or executes
such acceptance agreement.

         9. Standard of Construction  and Warranty.  Landlord  warrants that the
Tenant  Improvements  shall  be  constructed  in a good and  workmanlike  manner
substantially in accordance with the Final Tenant Improvement Plans (as modified
by change orders  approved by landlord and Tenant).  All materials and equipment
furnished  shall be new, of good quality and  installed in  accordance  with the
vendor's or manufacturer's  specifications,  instructions and requirements.  The
foregoing   warranty  shall  terminate  one  (1)  year  following  the  date  of
Substantial  Completion of the Tenant Improvements unless Tenant makes a written
claim against  Landlord  under the foregoing  warranty  within said one (1) year
period, in which case the warranty shall survive only a s to the specific matter
described in such claim.

         10. Payment of TI Costs. The TI Costs for the Tenant Improvements shall
be paid by Landlord and Tenant as follows:

                  A.  Landlord  shall  pay all TI  Costs  up to the  Maximum  TI
Allowance.  In no event shall Landlord be required to pay any TI Costs in excess
of the Maximum TI Allowance.

                  B. If the TI Costs  exceed  the  Maximum  TI  Allowance,  then
Tenant  shall  pay to  Landlord  the  full  amount  of all  Excess  TI  Costs in
accordance with the procedure set forth in Subparagraph C below.

                  C. During the course of constructing the Tenant  Improvements,
each progress  payment due to Landlord's  contractor or to any  subcontractor or
material  supplier shall be paid by Landlord and Tenant as follow:  (i) Landlord
shall pay a fraction of each progress payment,  which fraction shall have as its
numerator the Maximum TI Allowance and shall have as its denominator  Landlord's
estimate  of the  total TI Costs to  complete  the  construction  of the  Tenant
Improvements;  and (ii) Tenant  shall pay the balance of each  progress  payment
("Tenant's  Share).  Tenant shall pay Tenant's Share of each progress payment to
landlord  within ten (10) days after receipt of billing.  If, at any time during
the  course of  constructing  the  Tenant  Improvements,  Landlord  revises  its
estimate of the total TI Costs to complete the Tenant  Improvements  so that the
amount  previously paid by Tenant is not sufficient to pay Tenant's Share of the
TI Costs paid to date,  then Tenant  shall pay to Landlord  within ten (10) days
after receipt of billing, the amount necessary to increase Tenant's contribution
toward the TI Costs so that Landlord has paid only its  fractional  share of the
TI Costs and  Tenant has paid the  balance.  Upon the  completion  of the Tenant
Improvements,  landlord  shall  provide  Tenant  with  a  reconciliation  of the
estimated  TI Costs to the  actual TI Costs and  Tenant's  payments  on  account
thereof,  and Tenant shall pay to Landlord,  or Landlord



<PAGE>

shall refund to Tenant,  any net amount due or  refundable,  as the case may be,
within ten (10) days after Tenant's receipt of  reconciliation.  If Tenant shall
fail to comply with any demand for payment made pursuant to this Paragraph 10. C
within ten (10) days of receipt thereof,  Landlord may (i) terminate,  effective
immediately,  this Lease by giving written notice of termination to Tenant, (ii)
cease construction of the Tenant Improvements, and/or (iii) exercise any and all
remedies available to Landlord at law or in equity, including those set forth in
Paragraph 12.b of the Lease.

         11.  Accounting.   When  the  Tenant   Improvements  are  Substantially
Completed and all TI Costs have been determined, Landlord shall submit to Tenant
a final and detailed  accounting of all TI Costs paid by Landlord.  Tenant shall
have the right to audit books,  records and supporting  documents of Landlord to
the extent necessary to determine the accuracy of such accounting  during normal
business  hours  after  giving  Landlord at least five (5)  business  days prior
written notice. Any such audit must be conducted,  if at all, within thirty (30)
days after Landlord delivers such accounting to Tenant.

         12. Landlord's Code Work.  Landlord shall perform all of the landlord's
Code Work at the Landlord's sole cost and expense.

         13. Effect of Agreement. In the event of any inconsistency between this
Improvement  Agreement and the Lease,  the terms of this  Improvement  Agreement
shall prevail.


                        TENANT

                        ELEXSYS INTERNATIONAL, INC.
                        a California corporation

DATED:                  By:

                        Name:

                        Title:


                        LANDLORD

                        SOUTH BY/FORTRAN, a California limited partnership


DATED:                  By:

                        Name:

                        Title:



<PAGE>



                                    EXHIBIT D

                       HAZARDOUS MATERIALS MANAGEMENT PLAN

                  (To be provided by Tenant prior to occupancy)



<PAGE>



                                    EXHIBIT E

1.   ATT report dated July 9, 1992:  Preliminary  (Phase I)  Environmental  Site
     Assessment  Update for the Property at 4405 - 4445 Fortran Court, San Jose,
     CA (Project No. 929368).

2.   SECOR  International  Incorporated  report  dated  July 10,  1995:  Phase I
     Environmental Site Assessment Report - 4405,4415,4425,4435 and 4445 Fortran
     Drive, San Jose, CA (Job No. 70076-001-01).

3.   SECOR  International  Incorporated  report dated July 24,  1995:  Technical
     Report Soil  Sampling and Grab  Groundwater  Sampling - 4405 - 4445 Fortran
     Drive, San Jose, CA